What Is Margin Trading?

Margin trading is one of the most profitable, but at the same time, the riskiest of strategies. In margin trading, a crypto trader takes a loan from a broker, most often represented by an exchange, and provides collateral—the margin. At the same time, interest is charged for using the loan. But in this way, margin trading allows one to buy a cryptocurrency in excess of the balance of the trader. To make a deal, a trader has a margin account on the exchange, where funds act as a guarantee to the lender. A tool that allows one to trade amounts that exceed one’s own funds is called leverage. The size of the maximum possible leverage is established by the exchange operator.