Margin Trading to get a whole lot profitable, with this new feature
Leading cryptocurrency exchange, CoinDCX, has introduced a new feature to make Margin trading safer. The new feature, known as Partial Exit, allows investors to partially exit with a profit from margin trading, without the need for the full order to be completed.
Margin Trading and its drawbacks
Margin trading is a form of trading which is really popular in the cryptocurrency space. In a nutshell, margin trading allows a trader to trade more cryptocurrencies than they have in their wallet. This is done by getting a “loan” from the exchange. This new amount is called Leverage. The leverage can range between 1x – 100x depending on the exchange. CoinDCX supports 1x – 4x Leverage.
A successful trade allows the traders to earn the leverage times the profit, but an unsuccessful trade can also cause the person to lose the equivalent amount. This gives an opportunity for the trader to earn high rewards, but this strategy also comes with high risks.
One of the biggest drawbacks of margin trading has been the “all or nothing” philosophy. An order gets successfully processed if the trader’s set price fully closes.
For example, if a trader opens a long position with 1000 XRP at a price USD 0.40 expecting the price to go up to USD 0.45. The possible scenarios he encounters could be that the price moves upward to USD 0.45 according to his expectation where he makes a profit or it moves in the opposite scenario, say to USD 0.35, where he makes a loss.
Considering the price inching upside to USD 0.45 scenario, the trader has an option to close his position and earn the complete profit or stay invested expecting the price to rise further. Following the normal rules of margin trading, the trader makes a profit only if he closes his position- which means XRP hits USD 0.45 and he loses otherwise.
Partial Exit to the Rescue
This problem has been recognized by a lot of exchanges, but none of them have been able to find a solution. Now India’s leading cryptocurrency exchange CoinDCX has launched the Partial Exit feature to combat the drawbacks of margin trading.
“Partial Exit” feature gives the margin traders the power to protect their profit by partially exiting their position while they can continue to stay invested if they still feel their position has the potential to earn more profits for them.
For example, consider the previous example of XRP trading, If a trader, trading in the XRP/USD pair, long 1000 XRP at 4x leverage with an entry price of USD 0.40. The user may also specify 2 target orders of this position: 500 XRP at USD 0.42 and other 500 XRP at USD 0.44.
This method reduces the risk associated with the all-or-nothing philosophy by allowing the trader to make strategic exit decisions.
How to use the Partial Exit
Partial orders are currently live and it is really simple to execute one. To execute a partial order the trader has to
- Login/Signup on CoinDCX
- Create a Margin Trade
- For a given position, the trader has to click on ‘Add Targets’.
- If this is the first target order for a given position, it would directly open a form where the trader can add a target order of market or limit type for closing position.
- If this position already has some target orders, it would be listed there, which can be canceled or edited (depending on the order type and order status).
- He will have to then specify a quantity and price (not needed for market order type) and click submit to place the request.
- After the request goes through successfully, the list should refresh showing all his updated target orders.
Name: Shivangini Agarwal
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