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Margin trading for Ripple (XRP) and Litecoin (LTC) has been enabled in OKEx
They will be paired with Bitcoin (BTC)
Main cryptocurrency exchange OKEx has recently announced that two cryptocurrencies – XRP and LTC – will be paired with Bitcoin (BTC) for margin trading. Starting November 6, platform users can engage in this type of operation with both coins.
"Dear valued customers: to meet the demand of the public, we will open the exchange pairs of the XRP / BTC, LTC / BTC margins from 15:00 on 6 November 2018 (HKT)", reads the announcement of the exchange in its official site.
What is the trading margin?
While OKEx was already allowing these tokens to trade regularly, the news might seem confusing for the newcomer in the token trading ecosystem.
Trading with the token margin differs from spot trading as traders do not use their purchasing power, but rather that of a broker. In other words, they are borrowing money from a broker to buy more tokens that they could on their own. In this way, a trader can earn even more money than stick to the aforementioned practice.
However, higher gains also entail greater risks when margins are traded. For example, let's say that a person has $ 10,000 in XRP held in his OKEx margin account and wants to buy about $ 20,000 in BTC (because he believes the currency will skyrocket). OKEx (as a broker) will lend to that person the necessary funds to be able to purchase this amount in BTC.
If the BTC goes up enough, the person could end up with about $ 30,000 in this cryptographic asset if he sells it. It then repays the amount lent by the broker (the other $ 10 in XRP plus interest) and keeps the remainder. In this way, the gains were about 100% thanks to trading in the leverage margin, compared to normal trading, where the same amount purchased with its purchasing power would have represented only 50%.
But, if the BTC lowers enough, then that person could be forced to sell their purchased tokens to prevent further losses. Assuming he finished with $ 15K in BTC, he would have to repay the loan amount plus interest, and the remainder – about $ 5K – would represent a loss of half of the initial investment.
For this reason, OKEx reminded users to pay attention when using this method. "As a friendly reminder, the margin of negotiation involves the acquisition of funds to increase the purchasing power, it gives greater profit potential but also greater risks.We suggest you carefully evaluate your planned investments in light of the your knowledge, experiences, financial positions and objectives. "
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