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If you ever wanted to short or long Bitcoin using leverage, you had probably heard about BitMEX.
The exchange was established in 2014, considered the first of its kind in the Bitcoin margin trading field. BitMEX is currently the leading exchange by means of trading volume. It allows leverage of up to 100X.
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BitMEX Exchange Video Tutorial
BitMEX
Pros
- Veteran exchange - since 2014
- Quick registration, great interface
- High liquidity and trading volume for perpetuals and futures
Cons
- Trading fees are hard to understand, sometimes high
- No FIAT based options
- Unregulated
The biggest advantage of margin trading is that one can leverage a position without holding the associated bitcoin or crypto assets. In the crypto world, it is not recommended to hold a large amount of bitcoins on an exchange. Better to place them in cold storage.
Another advantage is that the exchange allows one to make short trades, generating profit when Bitcoin’s price goes down.
It is important to note that margin, or leveraged, trading is considered very risky and speculative, so you should trade with caution. Always trade amounts you can afford to completely lose.
The BitMEX Main Screen
On the right side, we see the last transactions made. In the middle, we have our chart. The left pane is actually the interesting one; that’s where we open our positions.
Quantity = The position size in US dollars.
Limit Price = The price we set in order to open a position.
Cost = The total price of our position.
Order Value = The total value of the position (if the leverage is set to 1, then it’s equal to the cost minus fees).
Available Balance = Our Bitcoin balance
Before opening a position, we will define the leverage. If this is your first trade, I would recommend leaving it on 1 – that is, with no leverage at all.
Leverage means the position cost divided by the same ratio. For example, if we set the leverage to x5, then we’d expect the cost of the position to be reduced by the same ratio – divided by 5. That means it will be reduced by five. This basically allows us to trade on bitcoins we borrow from the exchange. Keep in mind that the higher the leverage, the more we will have to borrow from BitMEX, and therefore the greater our fees.
Another thing you need to know about is the liquidation price. This is the value at which BitMEX will close or liquidate the position. BitMEX can’t afford to lose, and in order to not lose the money we borrowed for the position, the position will automatically close once we lose the amount of bitcoins that belongs to us.
How to trade on BitMEX exchange?
Place a buy order, or long position, when you believe that the value of Bitcoin will increase, or place a sell order (short position) when you hope to benefit from Bitcoin’s value decreasing.
We will set our buying price to be higher than the market price if we want the position to open immediately (buy from the sellers), or lower than the market price if we want to join the buy wall and wait for a seller.
We’ll need to confirm our position on the pop-up screen. Notice that we can see when BitMEX is estimated to liquidate the position.
Now we can see our position: the entry price, the unrealized PNL (the estimated profit, calculated according to the mark price) and the real liquidation price. If we close part of the position, we will see the gain or loss on the Realized PNL tab.
How to close a position on BitMEX exchange?
The first is by setting a Sell command: if we want the position to close at $4,200, we will create an inverse command to our original position with the same quantity.
Or if we want to close the position immediately, we’ll press the red Market button. The order will be released to the market and will close at the best available price. BitMEX has more advanced options such as stop-limit orders.
CLICK HERE for a tutorial on BitMEX’s advanced features like stop losses, market orders, cross margin, futures and more.
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