Bitcoin Leverage & Margin Trading Explanation and Example

Margin required : It is the amount of money your crypto broker requires from you to open a position. It is expressed in percents.

Equity : It is the total amount of capital you have in your account.

Used margin : amount of money in your trading account which has already been used up when buying a bitcoin trading contract, this contract is the one that's displayed in open trade positions. As a trader you can't use this amount of money after opening a trade because you've already used it & it is not available to you.

In other words, because your broker has opened up a position for you using capital you've borrowed, you must maintain this usable margin for your account as a security to allow you to continue using this bitcoin leverage he has given you.

Free margin : amount in your trading account which you can use to open new trade positions. This is the amount of money in your trading account which has not yet been leveraged because you have not yet opened a trade with this money - this is also very important for you as a trader because it enables you to continue holding your open trade transactions as explained and illustrated below.

However, if you over use cryptocurrency leverage, this free margin will drop below a certain percent at which your broker will have to close all your positions automatically, leaving you with a big loss. Btcusd broker at this point will automatically close-out all your open trade transactions because if your open trades are left open then your broker would lose money that you would have borrowed from them.

This is why you should always make sure you've a lot of free margin. To do this never trade more than 5 percentage of your account, in fact 2 percentage is recommended.