If you are a new crypto trader then you need to know about Bybit margin trading, especially if you are interested in using this high-end trading platform. Bybit is one of the world’s most famous crypto trading platforms. It is known to cater a vast audience interested in crypto trading, thanks to the variety of impressive features and tools it supports.
One of the aspects to know before using this exchange is margin trading. This is a popular type of trading that has grabbed the attention of a large audience in the trading community. Bybit is not the only exchange that supports margin trading. However, other platforms may not be as suitable as this well-reputed exchange.
Therefore, as a new Bybit user, you should know about the margin trading supported by the exchange as well as other details such as cross margin Bybit and more. Having such information will help you form your trading plan and will highlight how suitable this exchange is for you.
What is Bybit Margin Trading?
Margin trading is also called leverage trading. It is a derivative product based on Spot Trading. This type of crypto trading allows the traders to borrow funds from a broker. The borrowed amount is called leverage and different exchanges offer support to different leverage ratios.
The borrowed funds enable the traders to open bigger trading positions that can either result in high profits or high losses. In short, margin trading is a very risky venture because the profits are never guaranteed and it comes with high risks and high rewards.
All your assets supporting it in your spot account can be used as collateral to prevent your trading positions from being liquidated if the trades don’t go well. If your spot account risk level reaches a point where liquidation may be triggered, the system will sell your collateral automatically to pay for the borrowed funds and prevent liquidation.
Now as a new margin trader, you need to know that there are two types of margin trading that are isolated margin trading and cross margin Bybit trading.
Understanding Cross Margin Trading
In order to have a good and less stressful Bybit margin trading experience it is important for you to have as much information as possible. This can help you develop an understanding of what you are signing up for.
In case of cross margin Bybit trading mode, the entire available balance in a traders account can be used as collateral for the prevention of liquidation. This mode is often used for hedging because if a proper level of leverage is set, it is unlikely that a trader may face liquidation of their positions.
In other words, cross margin mode is shared by all positions that are under an account and are supported by the available balance.
Therefore, this type of Bybit margin trading is a more suitable option for experienced and institutional traders because it can be used as a hedging tool.
What is Isolated Margin Trading?
Isolated margin trading is different from cross margin because in this case the margin placed for a position is limited. If the margin falls below the minimum level that is required the position of the traders will get liquidated.
In isolated margin trading liquidation can easily occur if high leverage is combined with high volatility. However, one aspect of this type of trading you should know is that if a trader faces losses they will only be limited to position at which the margin is placed and the rest of the balance in the account will remain safe.
Considering what isolated margin trading offers, it is a more suitable option for new traders who want to minimize what they lose potentially.
Different Leverages by Different Exchanges
Once you understand the basic details of Bybit margin trading, you can move on to the next piece of information, which is the leverage ratio offered by each exchange.
As mentioned above, there are a number of trading platforms that support leverage trading because it is one of the most popular types of trading. However, the difference is in the leverage ratio that is offered by each exchange.
The leverage ratios offered to the traders in the industry can be as low as 2x or as high as 125x. If you are interested in using the Bybit exchange, you should know that it offers one of the highest leverages, which is up to 100x.
Learning about Bybit margin trading is important for all users of the exchange, even if they are not initially looking to start trading crypto. This is a crucial piece of information users of the exchange need to know as it can help them form a trading plan and understand fully what the exchange has to offer. Therefore, crypto traders and new Bybit users should know the details mentioned above.