Bitcoin Leverage & Margin Explanation and Example

Margin required : It is the sum of money your crypto broker requires from you as a trader to open a trade transaction. It's denoted in percentages.

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

Used margin : amount of money in your 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 have already used it & it is not available to you.

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

Free margin : amount in your account which you can use to open new trade positions. This is the sum of money in your account which has not yet been bitcoin leveraged because you have not yet executed a trade position with this money - this amount is also very crucial 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 leverage, this free margin will drop below a certain percentage at which your broker will have to stop out all of your transactions automatically, leaving you with a large loss. Btcusd broker at this point will automatically close-out all your open trade transactions because if your open transactions are left open then your broker would lose money that you'd 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 percent of your account, in fact 2 percentage is recommended.