Bitcoin Leverage & Margin Explanation & Example

Margin required : It is the sum of money your crypto broker requires from you to open a trade. It's denoted in percentages.

Equity : It's the total sum of capital you've got in your account.

Used margin : amount of money on your account that has already been used up when buying a bitcoin trading contract, this contract is the one that is shown and displayed in open trade transactions. As a trader you can't use this amount of money after registering and opening a trade because you have already used it & it's not available to you.

In other words, because your crypto broker has opened up a trade for you using capital you've borrowed, you must preserve this usable margin for your account as a collateral to allow you to continue using this bitcoin leverage that he has given to you.

Free margin : amount in your account which you can use to open new trades. This is the sum of money on your account which has not yet been bitcoin leveraged because you have not yet executed a trade position with this money - this amount is also very crucial for you as a trader because it facilitates you to continue holding your open trades as is explained & shown below.

However, if you over use leverage, this free margin will drop below a certain percent at which your broker will have and be forced to stop out all of your transactions automatically, leaving you with a big loss. Btcusd broker at this point will automatically close-out all your open trade transactions because if your open transactions are left open then your broker would lose money that you'd have borrowed from them.

This is why you should always ensure you have got a lot of free margin. To do this never trade more than 5 percent of your trading account, in fact two % is recommended.

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Bitcoin Leverage & Margin Explanation & Example