Earn more Bitcoin by Trading with Leverage at Magnr
If you are seeking greater returns for your Bitcoin, over and above any Interest reward from your Magnr Savings account, then Magnr Trading is a great option for you to do this.
With many exchange services out there, not all offer the service of trading with leverage. A Magnr account lets you leverage your trade on Bitfinex, Bitstamp, and itBit, even though they do not all offer leverage on their platforms.
Why Trade with Leverage
Leverage gives you the power to turn a small investment into a potentially large one. The most common investment using leverage that most people know of is in real-estate. When you want to buy a house you don’t normally have to (or intend to) come up with 100% of the purchase price right? Normally, you are expected to come up with something between 5-20% to put down on a home, and you get a mortgage for the remaining balance, paid over 15 to 30 years. The LTV, a common term in the real-estate industry for the loan-to-value, is your use of leverage.
Most of us know someone who bought the right place at the right time by only put a small amount of money down like $10,000. A few years later walk away with $100,000 or more, following a their property sale and due to their home rising in value during that time. This is the power of leverage.
At Magnr you get to use leverage on the available markets by trading a multiple of your investment in Bitcoin. Our platform lets you trade at 2x, 5x and up to 10x leverage on your initial investment. For example, you can put down 1 BTC and choose to execute a trade of 10* BTC on the exchange. As you can imagine, you don’t need big moves in Bitcoin in order to profit when you are trading out at 10 BTC at a time. As with any upside, there are downside risks as well when trading with larger amounts. Let’s take a look at how it works.
*10 BTC is an approximate value. Does not take into account trading fees.
Where does the leverage funds come from?
Magnr offers execution of trades at 2x, 5x and up to 10x leverage on your investment. We provide the leveraged funds from our own trading reserves and not from the Bitcoin from client Savings Accounts (link: Magnr savings post). The costs to borrow the additional funds to leverage your trade is charged out as lending interest with a 24hr Daily Funding Fee. As part of the multi-product business model, Magnr is able to use a proportion of these fees to pay the interest to clients holding a funded balance on their Magnr Savings account.
How Do I Profit from the Rise and Fall in price?
In a rising market
Take a look at the simple chart graphic below showing a Long trade –
On this trade, if you were long Bitcoin and you had 1 BTC to trade and you traded it, then you’d make a $20 profit. Now with the power of leverage and you take your 1BTC and trade a leverage amount of 10 BTC, now you have a profit of $200.
You can lose money more quickly this way as well. Thankfully Magnr has a built in Stop-Loss (a safety-cap) feature, which denotes a price that automatically closes your trade in the event of a heavy losses. In this case, you can see the stop-loss is at $317.99 or a loss of $64 per Bitcoin traded. You will be stopped out at a price which prevents you losing more than your initial investment.
In a falling market
This is an example of a short trade, a trade based on profiting if the price of Bitcoin goes down. You could decide to be bullish on the price of Bitcoin, expecting the value to increase in the long term, however you hear that there could be difficulties in the short term price of Bitcoin, and the prospects look rocky. You can take advantage of a price drop by executing a Short trade with the intention to profit from the downside.
Using the same open price example, we can go Short, again with 1 BTC and earn a profit of $20 with a regular straight-off trade. When you trade on the short side with Magnr using leverage, in the same way you earned a $200 profit with 10x leverage going long, the same profits can be attained during a price fall. There is also a Stop-loss applied on this trade, this time it’s above the open price since a rise in price would go against a Short trade.
Direct Market Access trading
Trades executed by clients are placed via Direct Market Access (DMA), meaning that the order is placed with each Exchange. This is done almost immediately via automated API calls between Magnr and each of the exchange Order Books (containing the market Buys and Sells). This means your trade on Magnr is no different than if you went on Bitfinex and held an account directly with them.
Prices on Opening and Closing of Trade orders are returned on a best-execution basis, where trades fill up the other side of the Order Book (a Buy or Sell) on the exchange.
An important note, trading and brokerage fees are to be considered when placing leverage trades. What are the trading fees? Our Help and Support site has all the relevant information regarding the Fees and Charges that apply.
For the newer trader, once you are ready to start trading in Bitcoin, the trading tools are designed to be very simple to use. Whether its leverage, comfort of safety caps against excessive losses, or its simplicity of the interface, Trading on Magnr is a great choice to seek the potentially higher returns.
If you are interested in opening up Trading Account, then go to our site at https://magnr.com/ and Sign Up today.