Margin trading, or arbitrage transaction with leverage is a kind of bet between a broker (or stock exchange) and a trader, secured with collateral on each side.
Arbitrage transactions based on margin transactions are not a new type of trading on the exchange and over-the-counter markets. Trading with leverage, as it is called, appeared in the financial markets thanks to the London stock exchange LSE, which in 1992 signed the first CFD-contract.
Subsequently, CFD margin trading has become widespread through numerous stock and over-the-counter brokers, creating an entire industry that many of us know as “Forex trading”.
- The possibility of a transaction volume that is several times higher than Deposit. This effect is achieved through the use of leverage technology, thereby increasing profit several times.
- The opportunity to earn both on the growth and the fall of the asset price. It is possible due to the fact that users do not buy or sell the asset itself, but only enter into a contract to change the value under the guarantee of fulfillment of obligations.
An exchange undertakes to:
- Open or close a trade at the nearest available price or the specified price in the pending order.
- To pay users the profit from trading operations.
- Provide leverage, according to the size specified in the trading terms.
A trader undertakes to:
- Provide collateral (margin) due to the size of the transaction (calculated automatically at the time of the transaction).
- Make sure that the amount of loss on the transaction does not exceed the maximum size of the Deposit of the trader.
It is possible to make money on the cryptocurrency not only buying it at the rate of price growth, but also to earn with the help of margin operations, betting with cryptocurrency exchanges on both growth and fall of quotations.