How to Margin Trade on Bitmex
Bitmex is a cryptocurrency exchange that enables traders to margin trade up to x100. Bitmex is only recommended for advanced traders and it also offers the possibility of shorting. Bitmex works with Futures contracts which are defined as ‘an agreement to buy or sell a commodity, currency or other instruments at a predetermined price at a specified time in the future.’
Creating an account
You will need to create an account first to start using Bitmex, this process takes less than 30 seconds and it’s really simple.
- Click on the blue ‘Register’ button on the top right.
- You will now have to complete all the fields, remember to use a valid email and a strong password. Keep in mind that anyone from the ‘United States of America, the province of Québec in Canada, Cuba, Crimea and Sevastopol, Iran, Syria, North Korea or Sudan; (ii) any state, country or other jurisdiction that is embargoed by the United States of America;’ is not allowed to use Bitmex.
- Confirm your email and log in. Once you have completed your registration, Bitmex will send an email to verify your email address, please also check the spam folder. Once you verified your email address, you can log in.
- Fund your account. Now you will need to deposit Bitcoin in order to start trading. Click on ‘Account’ on the top left and you will be redirected to your wallet. Click ‘Deposit’ to get your Bitcoin address, please note that Bitmex only accepts Bitcoin deposits and they are credited after 1 confirmation on the Bitcoin Network.
Bitmex offers up to 100x leverage on Bitcoin which means that you can buy 100 BTCs with only 1 Bitcoin. Bitmex, however, offers a unique feature to protect traders in case a trade goes wrong. Liquidation is an automatic process that involves liquidating your position in case you are approaching negative profit, this means that you will never lose more money than you have, unlike classic brokers where it’s possible to lose more money and be in debt.
Now that you know the basics, let’s start trading, first let’s look at the Trading Interface:
There is a lot going on here, so let’s break it down. First of all, let’s talk about all the possible orders.
Limit: is an order where traders can set a specific price to buy/sell. This order will only be executed at that specific price, this also means that the execution is not guaranteed.
Market: This is a simple order in case a trader wants to buy a coin immediately, this order will execute no matter what and will buy/sell at the lowest/highest price available instantly.
Stop Limit: This order allows traders to buy/sell only when the price hits a specific target, for example, I can set a sell order at $1000 only if the price goes below $1050.
Stop Market: This order is similar to the Stop Limit but it guarantees your order to be executed.
Trailing Stop: This order is defined as ‘A Trailing Value is set; if the price reverts by an amount equal to the Trailing Value, a Market Order triggers.’ by Bitmex.
Take Profit Limit: This order is pretty much the reverse of a stop order, it will execute when the price moves in a favorable direction and you want to make some profit, for example selling 30% of your position.
Take Profit Market: A market order is placed when the market reaches a specific trigger Price.
Now let’s start trading:
- Ready to trade: Now that we are ready to start trading, the first thing to notice is that Bitmex allows you to buy ‘contracts’. For example, if the limit price currently is $10000 and you want to buy 1 whole Bitcoin, the ‘Quantity’ should be 10000 and not 1.
- Check the Leverage Tab and select 1x.
- Now check the cost of your order below the Buy/Long and Sell/Short buttons: In this case, the cost is just a bit over 1 BTC because of the fees.
- Leverage. Now that you understand how it works, let’s pick an x50 leverage (certainly not recommended) and see what happens:
- The cost to buy is now only 0.0215 BTC instead of 1 whole Bitcoin. The order value stays the same at 1 BTC but you only have to pay 0.0215 from your pocket.
Now let’s look at some possible scenarios using an x10 Leverage:
Image courtesy of BambouClub- hackernoon
As you can see with a 10% price change, you are profiting with a 2x from your initial amount and similarly, if the price goes down by 10% only, you will lose all your money since that’s the liquidation price.
Advanced Order Functions
There are a few other advanced orders that can be used on top of existing orders.
Hidden Order: This can be used on top of a limit order, stop limit or take profit in order to hide it from the public order book. This order is used when traders don’t want to inform others of their trading intentions
Post-Only Order: Is a limit order that is only accepted if it’s not immediately executed.
Reduce-Only: This will only reduce your position, not increase it.
GoodTillCancel: This is the default setting for all orders and it means the order will stay forever in the order book or until canceled manually.
ImmediateOrCancel: This means that any unfilled portion left of your order will immediately be canceled.
FillOrKill: This means that the order will only execute if it’s completely filled.