Definition
Margin trading is a trading strategy that allows investors to borrow funds from an exchange or broker to increase the size of their positions. By using borrowed capital, traders can potentially amplify profits, but they also increase the risk of losses. Margin trading is commonly used in cryptocurrency markets to gain greater exposure to price movements without committing the full amount of capital. Exchanges typically require traders to maintain a minimum balance known as margin. If losses become too large, positions may be liquidated automatically.
Simple Explanation
Margin trading allows traders to borrow money to trade larger positions than they could with their own funds.
Example
A trader with ₹1,00,000 uses margin to open a ₹5,00,000 Bitcoin position.
Why It Matters
Margin trading can increase profit potential but also significantly increases risk.