Margin Trading is the practice of trading with borrowed funds, amplifying potential gains or losses.
Margin trading is a method of trading assets using funds provided by a third party. In the context of cryptocurrencies, margin trading allows traders to borrow money against their current funds to trade cryptocurrency "on margin" on an exchange. This means you can leverage your investment by opening positions that are larger than the amount of funds you have to place as margin. The advantage of margin trading is that it can result in larger profits due to the greater relative value of trading positions. Conversely, it can also result in much larger losses and could even lead to a negative account balance if the market turns unfavorably.
A trader with $1,000 of their own funds in an account may borrow an additional $1,000 from a broker to buy a cryptocurrency. If the cryptocurrency increases by 10%, the trader would make a profit of $200, rather than $100 if they had only used their own funds.
