By Alex Cavanagh on The CapitalWhen traders are trying to learn how to use margin trading in the cryptocurrency markets, there are some good resources available, however, more and more traders are flooding into the industry, and the dynamics of margin trading are changing dramatically.Margin trading today is a core tool used by much of the market in order to create trades that are more profitable, safer, and that have a higher chance of delivering a return.And while some platforms provide information on how to use their platform specifically for margin trading, it can sometimes be hard for traders to cross over from one platform to another and to relearn a different set of tools.So with this, we’re going to take a look at what margin trading is, including what shorting and leverage mean, before examining the size of cryptocurrency margin trading globally, after which we’ll look at why crypto margin trading is so popular today, and the best places to margin trade crypto, before finishing up with looking at the best crypto margin trading strategies, as well as the future of this sector of the market.What is Margin Trading?What is Shorting?Shorting involves opening a position that provides profits on the initial investment as the price of the asset goes down.The process of shorting involves a broker lending the trader an amount of an asset, which is then sold immediately. Once the price is lower than the original opening price, the trader can then rebuy the same amount of that asset cheaper, repaying the loan plus the interest, and keeping any profit that is left over.Shorting can be used on its as a standalone strategy during times when assets are overbought or already on downtrends, and it can also be used in conjunction with leveraging to increase the profitability of shorting an asset.By shorting, traders can monetize downward price movements and are not just confined to making money from buying low, selling high.What is Leverage?Leveraging is the process of creating a trade when a trader will borrow funds in order to be able to open a position of a larger size than they typically would be able to.If you open a long position on Bitcoin with 5x leverage and the amount you have to invest is $2,000, it would be exactly the equivalent of opening a long position with $10,000 to invest. For every 1%, the price of BTC rises, you would earn 5% profit instead of just 1% as you would from a normal scenario.Typically, leverage can be as low as 2x or anywhere up to 1000x and beyond, although between 5x to 100x is the most common ratio.In order to leverage trade, you need to provide an amount of the asset being traded called the margin, which determines how much you can borrow and the kinds of leverage that you can have access to.If the price moves 10% against your position it would be the equivalent of it normally moving 50% in the wrong direction, and so using mechanisms like stoplosses.Leveraging can sometimes hold risk, but when used wisely with appropriate risk management it can also be incredibly profitable.How Big is Cryptocurrency Margin Trading?When did Cryptocurrency Margin Trading Begin?Although today there is a vast percentage of all cryptocurrency trades that are margin traded, it wasn’t always this way.Going back to the earliest days of crypto, there were only a very limited number of exchanges that were available to traders, and none of these provided margin trading facilities.Over the years, some platforms began to provide margin trading and it has been a slow process for this to go from being relatively niche to now being a core part of the cryptocurrency industry.What is clear is that margin trading has been popular over time, and that as platforms have grown they tend to include some margin trading facilities as well.What remains to be seen is whether the concept of what margin trading is will evolve as well, and whether the way that cryptocurrency traders margin trade today will be the same as it will be in another 5 or 10 years.Is Cryptocurrency Margin Trading Popular Today?Cryptocurrency margin trading is very popular today, with many of the world’s largest cryptocurrency brokerages and exchanges providing this service.Traders globally have voted with their wallet by adopting margin trading as their preferred way to trade en masse, and this has meant that the lucrative nature of this sector has drawn in more and more platforms that are eager to provide similar services.Margin trading today is available on platforms that until only a year or two ago did not provide this.A big driving factor for this has been the influx of high-quality margin trading specialist platforms that have taken huge amounts of market share from older, non-margin-trading platforms.While the market as a whole has grown, it has been the margin trading sector that has utterly outstripped the rest of the market.Where are the Best Places for Crypto Margin Trading?PrimeXBTPrimeXBT is one of the premier cryptocurrency trading platforms in the world, focusing on providing advanced multi-asset margin trading services, and growing to handle up to $950 million of global crypto trade per day.The platform has grown exponentially over the past couple of years, fuelled largely by providing the lowest fees of any major crypto platform, a wide range of cryptoassets and traditional assets, and an easy to use and intuitive user interface, suiting both novice and expert traders.Traders can access the highest leverage in the industry on PrimeXBT, with up to 100x on cryptoassets that include BTC, ETH, LTC, EOS, and XRP, and up to 500x on traditional assets that include stock indices, commodities, metals, and forex pairs.PrimeXBT’s fees are low, with just a flat rate of 0.05% being applied to all trades, irrespective of the size of the trade, or the asset being traded.As well as this, PrimeXBT has continuously introduced new upgrades and added features, with some of the more recent including their new iOS and Android apps, and a unique peer-to-peer fund management module, which allows traders to share resources and information, and to profit together.eToroeToro is one of the oldest online trading platforms in the world, having launched in Tel Aviv, Israel, in 2006, and remaining operational since then until now, growing rapidly as a result of their expansion marketing campaigns online.eToro provides a wide range of assets for traders, with much of their focus starting and remaining with traditional assets like forex pairs, and only more recently including cryptocurrencies as well.The platform is professionally-made, and while it is large, it still remains relatively easy to navigate, although the user interface is substandard compared to many other of the top platforms, making it difficult sometimes for novice users.eToro is the only non-crypto-first platform on our list, and it’s been included because although they were very late to the party, they have put in considerable effort to getting into the cryptocurrency market, and are starting to list a wider range of cryptoassets for traders.BitfinexBitfinex is a trading platform that has been around for many years and has weathered many different storms, but at the same time has had a dark cloud hanging over its reputation because of its dealings with Tether, the world’s largest stable coin.Bitfinex has been an integral part of the cryptocurrency market for years, having been one of the first platforms to introduce margin trading, and listing a wide range of assets while handling a large amount of global crypto trading at different points.Bitfinex has suffered some serious blows to its reputation, however, with the ways it handled Tether drawing widespread criticism.Saying this, Bitfinex is still one of the largest trading platforms in the world, and one of the central parts of the crypto ecosystem.What are the Best Crypto Margin Trading Strategies?Hedging using shortingHedging is a useful strategy that provides protection against large losses in the event of the price moving against a position.Instead of just creating a position that will either generate profit or a loss, hedging is the process of creating conflicting trades that will yield the opposite result in any outcome.Ie. if the price of Bitcoin goes up and there is a Bitcoin long and short position, then one trade will generate profit while the other generates a loss.Shorting can, therefore, be used to build strategies that protect against large scale losses and that are protected in a wide range of scenarios.Hedging is one of the safest ways to design strategies that are robust under pressure, and that has the required risk protection in place to remain profitable long-term.Leveraged algorithmic tradingAlgorithmic trading is a key part of the cryptocurrency market today, with most trades being executed by autonomous bots.Market making is the practice that exchanges use in order to ensure that there is a tradeable environment for users, and all major market makers use bots to trade 24/7.Traders can also use bots to trade cryptocurrency, which means that they can trade continuously without needing to control the trades that are made manually.The goal of algorithmic trading is to develop autonomous strategies of continual profit-making, with rules built into the logic centre of the bot in order to decide when a trade should be made.Once a reliably profitable bot has been developed, the most efficient way of using investment capital is by leveraging the trades it makes in order to maximise profitability.What is the Future of Crypto Margin Trading?Crypto margin trading became an addition to the status quo, which was normal 1:1 buy-low, sell-high trading that the industry began with.Over time more traders have wanted to diversify the way they trade and so as the demand for margin trading has grown, so have the facilities to be able to do this.Today crypto margin trading is a core part of the market, with many of the largest cryptocurrency trading platforms in the world providing leverage and shorting on a range of different cryptoassets.As this trend continued, it’s likely that margin trading becomes even more entrenched within the cryptocurrency industry, and that newer margin trading products become available.At this point, it is not likely that we will see a regression of the importance of margin trading in the cryptocurrency market, but what’s much more likely is that margin trading will simply become more advanced and ubiquitous.In Summary: How to Use Margin TradingWe found that margin trading is a growing sector of the cryptocurrency industry, that today has a central role in how traders engage with markets, as well as being responsible for a large amount of all trades globally each day.Margin trading can be used for a number of reasons that include hedging an open position for added safety, increasing the efficiency of an investment, or in order to maximise the likely return from a reliable strategy.There are a number of places online where you can margin trade cryptocurrency, however, the list that we’ve put together represents some of the best in the industry. These platforms have higher trade volumes and a higher profile than the rest of the industry, and are widely used by many traders.The future of crypto margin trading is not certain, however, what is certain is that it will be an integral part of the market for a long time, and that over time it's only likely to grow in size and importance.The Capitalhttps://medium.com/media/3b6b127891c5c8711ad105e61d6cc81f/hrefThe Definitive Guide on How to Use Margin Trading [2020] was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.