b. Derivatives and Margin Trading
With the knowledge you already possess about these two topics all we’re going to do is amalgamate this knowledge and make it into one i.e. Margin Trading with Cryptocurrencies on the Delta Exchange. If you still feel unsure about margin trading or just want to brush up your skills read this blog on Margin Trading Basics.
Now let’s get down to business and for the real reason, you are here. What is delta exchange? What is margin trading on delta exchange? Can I as an individual associate with Margin Trading with Cryptocurrencies? And finally, where do I sign up? All these questions hovering on your mind are going to be answered in this short blog so that you can get done the reading and start trading.
Before you get into margin trading, it is vital you have had previous trading experiences before and a fair knowledge about technical charts and analysis. If you are a newbie, it is better to get some experiences before through equity futures and then mock trading.
1. What is the Delta Exchange?
Delta Exchange is an online platform that allows you to trade in the futures of cryptocurrency. While you cannot directly buy cryptocurrencies on this platform, you can transfer the cryptocurrencies that you own onto this platform and then trade in the futures market. On our Delta wallet, BTC can be deposited. However, if you wish to trade in other contracts, you can easily convert them on our exchange. Here is the list of the futures contracts that you can trade with on our platform.
Delta Exchange helps you with margin trading and also offers 100x leverage on all your trades. Delta also have lower trading charges on our platform. Delta Exchange charges trading fees only for taker orders (0.075% for BTC contracts) and offers a trading fee rebate for maker order (-0.025% for BTC contracts).
Trading Pairs On Delta Exchange:
BTC-USD Futures: Quoted in USD and settled in BTC
ETH-USD Futures: Quoted in USD and settled in ETH
XRP-USD Futures: Quoted in USD and settled in XRP
XLM-BTC Futures: Quoted in BTC and settled in BTC
Whilst, at the moment Delta do not have options trading on our exchange, it won’t be long enough till you can trade in options as well as futures as the team at Delta is working on options trading. Along with options they also plan to launch perpetual swaps to make trading more interesting for investors.
2. What is margin trading?
This is the real deal breaker on the entire article. We’re going to try and break it down as much as we can in simple words so that you understand margin trading on our platform really well and can apply the knowledge in real life. *Please note we are not providing any trading tips or advice on how to carry on orders, just a fair bit of knowledge from us to you*
Margin Trading is a form of trading wherein you enter into a trade with a part of your own capital and the other through borrowed funds. Margin trading is possible due to the existence of the lending market. Lenders provide loans to the traders in exchange for an interest in return. You take the extra risk of borrowing funds because you think the odds will be in your favour.
While the term ‘borrowed funds’ is used, there is no real life transaction of the amount happening, the amount is funded through other contracts on the platform. In other words, on the delta exchange, when you enter into a long contract, that is possible only because someone went short and vice versa.
Let’s talk numbers and an example to make matters easy. Suppose delta exchange provides a 2X leverage. So if you want to enter into a futures long transaction amounting up to $1000, the capital that is required by you to put in is only $500. The remaining $500 will be put up by the exchange or the other traders. Of course, the $500 that you borrow does not come free of cost and is owed back after the transaction is complete with a fee. The rate of interest or fees charged will be shown on your counter when you enter in the transaction.
On Delta exchange, you can leverage long or short depending on the type of trade you want to execute. The major advantage with margin trading on crypto is the security aspect. As one does not directly trade with cryptocurrencies, we provide high-level security on our platform.
We’re just going to address a few terms now that you will encounter when you start margin trading on our platform. While these are terms you would’ve already come across or have some prior knowledge about, it is always advisable to know more before getting into something.
Before we start on the terms, let us continue with the previous example itself to make matters easy. We have entered into a long transaction with a 2x margin.
1. Leverage – Leverage is the amount of funds you have borrowed and leverage rate is the rate which decided how much will be the borrowed funds. In our example, the total amount was 1000$ at a 2x leverage which meant $500 of the amount was in the form of leverage.
2. Liquidation Price – The price at which your account balance is completely wiped out. While liquidation price could involve some calculations, on our platform the price is shown on your counter before you enter into a transaction.
3. Limit Order – This is the most basic type of order that is followed worldwide. A limit order is when you want your order to get executed at a particular price only. Suppose you want to go long on a futures transaction at a rate $100 only, quantity 10 place a limit order. When the price hits $100, your order will be executed.
4. Market Order – Just like the name suggests, the order will get executed at what the market rate is at the moment of placing the order.
5. Take Profit – This is an obvious terminology. When you entered into a transaction of longing futures at $100 quantity 10, with a 2x leverage, as soon as the prices go up your profit increases and you could take profit.
6. Stop Loss Limit – Stop loss essentially means you cannot take loss below a particular threshold level and hence you put in an order believing that when the price hits, for example, $90 your threshold level has been breached and you want to exit the trade. At this point, even if you aren’t in front of the screen your order will get executed when the price is $90 because of the stop-loss limit order.
7. Stop Loss Market – As the name suggests, where there is a sudden spike in the movement of the price, and in our example downwards and we haven’t put in a stop loss limit the next order to place is a stop loss market. This would help in exiting the trade immediately.
8. Trailing Stop – Now with our example, suppose our long position contract has reached $120, we are in a comfortable position to exit. However, if you feel there is still a chance for an up move but you are not ready to take that risk you can place a trailing stop order at $120. This means as the price goes up you are good, but if by chance there is a sudden downward movement too let’s say $105, your order will get executed at $120, thus limiting your risks but maximizing your profits.
9. Order Book – This shows the number of buyers and sellers present at the moment with their various price point levels.
3. Can I as an individual associate in Margin Trading with Cryptocurrencies?
Delta Exchange is a platform mainly for individuals who wish to trade on futures in respect with cryptocurrencies. The signing up process is really easy and can be done under a minute and requires only your name and email id. Delta also have a referral program which can help you earn extra commission for lifetime.
4. Where do I Sign-up on Delta Exchange?
Now that you have read and need to know mostly everything about margin trading, what are you waiting for? Start trading on Delta Exchange today.
Still unsure about margin trading and just want to get a feel of it before you get into the real deal? Don’t worry, we’ve got you covered in that aspect too. Delta Exchange provides a mock trading platform for investors to know what they are getting themselves into and to get a better feel of the entire process. Click here to try the mock trading terminal.
We hope you liked this blog and stick around to know more! In case you have any doubts, just comment in the section below and we will ensure to get back to you as soon as possible! Till then, happy trading!