Margin Trading on BitMex – a Tutorial

BitMex.com is the place to be if you want to have a website that provides digital currency exchange services with leverage. Here people will be able to do margin trading through their provided features from their selection of crypto markets. Users will be able to trade BTC against USD, and other cryptocurrencies like ADA, BCH, DASH, ETH, ETC, LTC, NEO, XMR, XRP, XLM, and ZEC.

What’s even better is that the website also offers a demo account for people that want to explore the world of crypto trading without spending any money at all! All they need to do is to create a separate demo account and start experimenting with the available markets.

Billions of dollars are changed on the trading markets each day through traditional currencies. It’s no surprise that in the past couple of year Bitcoin penetrated this market fully too. The daily volume of Bitcoin trading according to Coin Market Cap is up to 5 billion dollars. The BitMex BTC/USD market offer derivative products based on Bitcoin with an average daily volume of more than 800-900 million dollars even during the crypto winter period. This is more than impressive and makes them the clear leader on the market in terms of trading volume.

Bitmex Platform Walkthrough

Without further delay, let’s dig into their website and familiarize the buttons and important tabs. We have color-coded the important areas of the platform for easier reference.

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Black – Located at the topmost part of the exchange platform is the market overview. Clicking your mouse on the digits will give you data on the selected market showing you the gains and losses with just a few clicks of the button.
Blue – The left-hand side panel is the order slip and which contains all the details of the trade that you will be making. The lower part of the panel also includes the market contract details where the trader will see the index price, open value, and funding rate to name a couple.
Red – The market selection area is where you will be able to change from the different available markets on the website. Simply click on the market that you want to trade at and this will automatically show you the relevant charts and numbers.
Green – This is where you will be able to see the charts in the selected market. Aside from the selected market chart, traders will also be able to use this area to view the order book where recent orders are being listed.
Purple – On the lower part of the exchange platform is where you see the current positions, active orders, and your order history. This is perfect for keeping track on your latest actions made on the exchange platform.
Yellow – Recent trades will be shown on this panel. For a seasoned trader, this is one way of telling the most updated price of the market and can be used for predicting dips.

The Gold box on the upper right-hand side of the exchange platform shows the available balance of the account that has been logged in. Please be advised that this will always show the current balance in Bitcoin and not USD or any Fiat currency. In addition, for all our non-English speaking traders will be able to change the language from English to Chinese, Russian, Korean, and Japanese. Now that we’ve familiarized ourselves with the exchange platform, are you ready to trade?

How Trading works at Bitmex

General overview

Bear in mind that the BTC/USD market on BitMEX is a derivatives market not actually spot trading Bitcoin. This means they offer CFD trading, so when you day trade with Bitcoin on BitMex you do not actually own Bitcoin, just a certificate that follows the price movements of Bitcoin.

BitMEX was founded in 2014 by three individuals, currently, it is owned by a company, which is registered in the Seychelles but they have offices worldwide.

You can trade two types of contract at BitMex: perpetuals and futures. Perpetuals are basically spot trading and you can use here leverage up to 100x. Futures contracts you can trade on the possible future price of Bitcoin buy entering a contract and fixing the price today.

Sign up and make your first trade on BitMex

You can register with an email address and password along with a country of residence and name. No need to go through KYC process as deposits are only accepted in Bitcoin. You will receive an email to verify your registration.

Fund your account

Fund Bitcoin deposit on the platform by going into Account -> Wallet -> Deposit. Here you get a deposit account in a QR code form. Go into your Bitcoin wallet and send over the amount of Bitcoin to this address. The minimum deposit amount is 0.0001 BTC. Your deposit will be credited after 1 confirmation on the Bitcoin network.

Place an order

Go to Trade -> Place Order and you are ready to make your first trade on BitMex. There are several order type you can choose from and you can also set here the leverage for the position you are entering. On the main screen you can follow BitMex’s own order book along with the live trades placed on the platform. Follow your current and past positions in the bottom box or chat with others in the troll box. Make sure you are aware of all features before jumping into a trade.

A Margin Trading Tutorial for Bitmex.com

Trading on a margin is basically borrowing money from a broker to place an order. It is a direct loan from the website that you want to trade at. The leverage provided by margin trading enables you to buy more than what you actually have.

Bitmex.com offers up to 100x leverage for BTC and goes up to 33.3x for other available coins. Here, aside from BTC the website also supports ADA, BCH, DASH, ETH, LTC, NEO, XMR, XRP, XLM, and ZEC. Now that we’ve got that out of the way, we will be showing you how to trade here at Bitmex.com. And as we go through all the trade processes we will discuss important inputs and explain the whole process too.

There are different types of order tabs that you will be able going to choose from here at Bitmex.com. Knowing which tab is best for your transaction is as important as knowing if you’re going to make a profit out of the trade or not.

Limit – The most common order type on the website is the Limit order. The reason for its popularity is the straightforward approach on how to buy and sell.
Market – The market tab is your one-button to buy or sell for the current price. When using the Market tab, all you need to do is make sure that you double check everything since latency plays a big role in updating the website’s current price on the chosen crypto.
Stop Limit –To get a rough idea of how the stop limit works the system lets you enter any amount of the limit price and stop price of the current market. The order will be placed at a specific price you entered or better after the provided stop price has been reached. At the moment the stop price is reached, the order will push through to buy or sell at the limit price or for a better one.

How to trade under Limit and Market Orders

The default page that you will be looking at right after you logged in would be under the Limit Order tab. This tab allows you to place an order may it be Long/Short (Buy/Sell) at your desired price.

Shown in the screenshot above is a sample of a Limit Order for 5 contracts. The Limit Price is the price that you want to buy or sell it. For our sample, the limit price is 10155.5 per contract and we’ve got five contracts listed shown under the Quantity box.

Now if we click on the submit button on either buy/sell we will be moving our position to plus 5 or minus 5 contracts depending on which option we choose to take. If you hover your mouse over these commands, you will also be provided with your estimated liquidation price after the execution.

The “Post-Only” box will not execute immediately against the market and is used to ensure the maker of a rebate. If the order will execute against resting orders, it will cancel the whole order instead.

The “GoodTillCancel” box shows the default selection which is “GoodTillCancel”, meaning the order will push through until you cancel it manually. It can also be set to “ImmediateOrCancel” which will set the unfulfilled portion to cancel immediately after the order has been placed. The last setting is called “FillOrKill” where the order will be pushed through if the exact quantity can be filled.

The Market Order is pretty straightforward since the system will do all the work for you and find the best available price. This tab also includes the same features that the Limit order has, the only difference is that you are unable to manually choose the price since you are letting the system work by itself.

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How to trade with Stop Orders

Unlike the regular orders that we’ve already talked about above; stop orders do not appear immediately when you log into your account if you do not click on the tab selection itself. The difference is that stop orders are being triggered by a stop price.

Stop Market Order is an order that is pushed through when your stop price is hit.

For example, if the price of BTC is at 16,000 and you want to purchase it for a lower price at 15,000 (which is shown on the screenshot) then the system will wait for the price to drop down until 15k before the order is triggered and pushed through.

Stop Limit Order similarly works the same as the Stop Market order that we’ve talked about earlier with the additional “Limit Price” tab wherein you will be able to adjust manually as well. The sample screenshot we’ve got the stop price at 15000 and limit price set at 15100.

So what happens is that the system will wait for the price to reach 15000 before the order will be pushed through but the limit price is set as a safety that you will not pay more than 15100.

Trailing Stop Order works with a trail value instead of a limit to determine when the order will be pushed through.

Shown in the screenshot above the trail value is set to $10. For example, we have placed the position when the price for BTC was at $60 and trail value at $10. When the value of BTC will go down to $50 the order will be pushed through.

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Take Profit Orders

Taking profit orders allows the trader to set a target price on a live position and close it to take the profit. Taking profit orders can be done through a market order or limit order. This feature can be used to set a target price for a position, it works just like a stop but triggers are being set in the opposite direction.

Order Confirmation

When an order is confirmed, this will show up on the bottom part of the platform. The sample screenshot shows the active orders that have been filled and is waiting to be pushed through. An order can be canceled by clicking “Cancel” on the appropriate order that you want to be canceled from the active list.

In addition, when an order is fulfilled this will light up and show on the bottom of the platform; just like the sample screenshot below.

If you feel like you’re not that confident yet, it would be best to try out their test trade website wherein you will be able to try every step shown on this guide and go through every feature yourself to give you a hands-on experience.

You do need to create a separate account for the test platform but that would not take you more than three minutes to complete! Please click this link to be redirected to the test platform website.

What is day trading?

Day trading is a speculation technique on the market which involves buying and selling financial products, such as stock, currencies or derivative assets within the same day. Strictly speaking during day trading any position opened throughout the day must be closed by the market close. Although the term is often used more broadly as well when the traders have open position throughout multiple days to benefit from the favorable market moves (which is originally called swing trading).

Day trading can be carried out as an individual trading strategy, but most of the times, trader use day trading in a complex trading strategy as only one of the several components. The main reason behind doing day trading is to quickly profit from intraday market movements, hence it is a speculative trading strategy. Originally only institutional investors participated in day trading, but the options and possibilities offered by electronic trading opened the door to private investors as well. Nowadays everyone can participate in the day trading markets.

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The underlying asset of day trading can be basically anything that has enough liquidity to be able to have a daily trading market. Stocks, derivatives such as options and futures, currencies, indexes, interest rates, and commodity products are all among the most common day traded financial assets. Cryptocurrencies, such as Bitcoin and other altcoins have an emerging interest in the trading markets and often used as well by day traders to general profits on the markets.

Depending on your own circumstances, day trading might be a suitable strategy for you or with a careless attitude it can lead to significant losses. Make sure you understand what you are dealing with before you risk any of your own capital.

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Day trading cryptocurrencies

Day trading with cryptocurrencies can be very similar just like trading with any currency on the market You have trading pairs compared to fiat currencies such as dollars or euro, or trading pairs among altcoins such as Bitcoin/Ethereum or Bitcoin/Ripple and so on. However, there are some nuances which are important to be aware before you start day trading with Bitcoin.

Cryptocurrencies, such as Bitcoin, Ethereum or Ripple are a relatively new asset class, Bitcoin itself just celebrated its 10th birthday in 2018 which also means the market is not working exactly the same way. Because it is a developing market place at the moment as well, the efficiency of the market is not perfect, or close to perfect as you can experience on the traditional financial markets that have been hundreds of year of history.

Insider trading

As cryptocurrency markets are not regulated strictly in many countries it also means there is no formal legislation in place like the ones you can encounter with on the traditional markets. Insider trading refers to the information asymmetry between the insiders (who know something which can influence the market prices) and outsider (the rest of the market participants.

Insider trading on crypto markets On the traditional marketplaces, insider trading is handled very strictly. People who are working at such companies which bear market and price influencing information are facing serious consequences in case of caught on the act of insider trading. Beyond getting fired, the punishment can go further to a significant amount of penalty fees and even prison sentences. On the other hand, no such regulation exists on the cryptocurrency markets, hence trading tips are more common phenomena when you are day trading with bitcoin.

Insiders can be the executives and leader of cryptocurrency companies, such as exchanges, ICO firms, wallet providers, mining pools. These companies can easily manipulate prices with spreading or withholding certain information that can influence market prices. Some of the exchanges have established already rules to mitigate insider trading, but these are more on a best effort basis as there is no regulatory authority that can supervise the sector completely.

Another type of insiders as the so-called ‘whales’ who hold a large amount of a certain cryptocurrency. As only 21 million Bitcoins will be on the market once all the coins are mined, Bitcoin is a scarce resource, meaning an only limited amount of it is available. Early adopters, mining companies and investors have a significant amount of Bitcoin holding compared to the total outstanding coins. This means in case any of them places a large order on the market it can move the prices in their desired direction, which can be used for market manipulation.

Although it may seem easy to act on a rumor which is spreading over the market, it is crucial to verify the information is indeed coming from a legit source. Unfortunately, however, scammers have penetrated this industry too just like everywhere. As (the (right) information can lead to significant amount of profit, these scammers promise to offer news in exchange for money – however in most of the cases after you have pay, you got nothing. Pump and dump

Beyond acting on the news, there is another common form of market manipulation in the crypto space. Pump and dump is a market manipulation technique, where a group of insiders gathers and artificially create demand for an asset which leads to price appreciation (pump). When the price is increasing it attracts outsiders as well to buy and once the critical price is reached, outsiders, sell off all of their holdings which leads to rapid price crash (dump). that is suffered by the outsiders.

No Insurance

When trading with brokerage firms which are registered your deposits are protected by certain insurance providers to avoid losses in case a brokerage firm goes bankrupt. Many OTC trading firm does not offer such insurances and it is definitely a non-existing term in the crypto trading industry. If an exchange you are using the day trade bitcoin goes out of business from one day to another there is no authority you can turn to get your money back. The best bet you have is to form a class action lawsuit against the owner of the exchange, as it happened in the case of Mt.Gox. But even with that, it can be years until you see your money back. And only if the exchange has transparent owners, as many exchanges does not willing to share ownership structure with the public. In the case of BitMex, it is good to know that they have an insurance fund of 9000 Bitcoins which can be used in case there is a system generated loss.

High intraday volatility

Even compared to traditional forex markets the intraday volatility experiences on the Bitcoin and altcoin trading markets are significantly higher. This means the prices can instantly change by significant amounts. Intraday increase or decrease of two decimal percentages (i.e. above 10-15%) happens almost every week, while there had happened some even bigger crashes and strikes in the history. Be prepared for the roller coaster when you are joining the day trading world of bitcoin.

High intraday volatility Higher intraday volatility also means much lower leverage is enough to get the same results as in forex trading. In terms of margin trading, you can borrow money to be able to invest more in the hope of getting more profit from the same trade. However higher leverage also means your loss can be significantly higher. Only start margin trading if you are familiar with the basics of trading and you know the asset you are trading with.

Although BitMex offers leverages up to 100x you might want to consider that extraordinary high. Given the high intraday volatility mentioned above sticking to 5-10x leverage should be sufficient to still gain significant amount of profit from a winning trade. You can go up to 100x but in that case you are also risking that you loss will be multiplied by 100 too.

Bitmex.com Fees, Deposits and Withdrawals

When you day trade with Bitcoin on BitMex make sure you understand the fee structure of the platform. As you will likely do a significant amount of contracts on the site, given the nature of day trading, you will be paying much more in fees compared to a buy and hold strategy.

BitMex applied a maker-taker fee schedule. This type of fee structure encourages traders to provide liquidity on the market. The make fee is 0.025% vs the taker fee is 0.075% regarding perpetuals and traditional futures contracts. Depending on what type of contract and order you are entering you may pay additional fees for example for funding or settlement.

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The website does not charge any deposit or withdrawal fees. The charges that are set are for the BTC network fee and is used by the blockchain. You can read more about their fees in their websites.

Things to keep in mind while trading:

Before you start trading, you need to be familiar with what you are getting yourself into. If you want to pursue margin trading then you need to make sure that you know the basics and the difference between a margin trader account and a cash account.

Cash accounts are accounts wherein you get the actual funds deposited reflecting on your account and you are unable to trade more than what you have.

Margin accounts are not FREEBIES that you use for free! A margin is in the simplest way a “loan” given to you by the trading website. Of course, loans need to be paid back with interest; and this will depend from one website to another. Creating an account with leverage is the expansion of funds from a small amount to a much bigger one creating more opportunities for you to take.

But this does not mean that you will be using the leverage service without any fees at all. Since you will be paying fees on top of the funds that you are going to use, the margin of investment and ROI should be considered.

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Best practices for trading Bitcoin at BitMEX

Finally, check out some of our tips and best practices when day trading with Bitcoin at BitMex.

1. Know what you are investing in

You need to understand both how markets work and how Bitcoin works to be successful in day trading. Beyond your capital, you need to invest your time for learning the basics.

2. Start with minimum capital when still learning

When you are at the beginning of the journey minimize the invested capital to make sure you do not lose too much when still learning. Only invest the amount of money you afford to loose. Even if you have a good strategy unplanned market moves could get you liquidated within seconds.

3. Go sleep with closed positions to sleep well

When you are doing day trading it means you MUST follow the market in every single second. A Redditor shared that he lost 800 USD just buy going into the shower at a wrong time. Make time in the day that is specifically dedicated to trading. Minimize distractions such as troll box, TV or even family.

4. Make a strategy

It’s a lot easier to find two or three winning trades than it is to find ten or twenty. Once you have made some money, sit back and relax. If you see market crashing, don’t panic as it only leads to emotional, but not rational decision.

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Please keep in mind:

When you trade on margin, YOU CAN LOSE EVERYTHING IN A VERY SHORT TIMEFRAME! When you buy and sell coins on spot, you can “sit out” certain market cycles and corrections and you are not forced to sell. With margin trading – if you get stopped out, the whole amount you have put in that trade is lost, even when the price goes “in your direction” just 5 minutes later.

Be aware of that, only trade with what you can afford to lose and train with very small amounts until you are ready to bet larger amounts on your trades.