This article explains how to do leveraged trading on BitMEX. For this example, we will use the XBT/USD futures contract on BitMEX. These contracts on BitMEX are reverse futures contracts. For example: XBTU23 – The contract symbol consists of the Bitcoin symbol (XBT) along with the expiration month and year code (e.g. XBTU23 represents inverse XBT futures expiring in September 2023).
For this example, let’s assume a trader deposits 1XBT of assets and assumes 25x leverage.
XBT is what BitMEX calls Bitcoin, exactly what other platforms call BTC.
“Go Long” on the XBT/USD futures contract
Let’s say a trader believes that the XBT/USD pair will rise and holds XBT stock. Using 25x leverage, traders can control a futures position worth 25 Bitcoin. The XBT/USD futures contract is trading at $30,000 USD, with each contract worth one dollar of Bitcoin at any price. This means that if the price of XBT/USD rises by 1%, the value of XBT will also rise by 1%.
If a trader wants to buy 25 XBT futures contracts, the trader would need to buy 750,000 contracts, which is 25 XBT / (1 / $30,000).
If the price of the XBT/USD futures contract rises 10% to $33,000, the trader’s position is now worth 27.5 XBT.
The trader took a profit of 2.5 XBT, which is 27.5 XBT (futures value at XBT/USD price of $33,000). – 25
If the above trade is performed with 25x leverage, the return on the trader’s 1 XBT capital will be 2.5x: 2.5 XBT (profit) / 1
“Short selling” of the XBT/USD futures contract
In contrast, traders believe that the XBT/USD exchange rate will fall. It has XBT in capital. 25x leverage allows traders to control a futures position worth 25 Bitcoin. The XBT/USD futures contract is trading at $30,000 and each contract is worth one dollar of Bitcoin at any price. This means that if the price of XBT/USD falls by 1%, the value of XBT will also fall by 1%.
If a trader wants to sell 25 XBT futures contracts, the trader would need to sell 750,000 contracts, which is 25 XBT / (1 / $30,000).
If the price of the XBT/USD futures contract falls 10% to $27,000, the trader’s position is now worth -22.5 XBT.
The trader made a profit of -22.5 XBT (futures value at XBT/USD price of $27,000) – 2.5
If the above trade is performed with 25x leverage, the trader’s return on capital from 1 XBT would be 2.5x.
In addition to the XBT/USD futures contract, BitMEX is one of the few cryptocurrency exchanges that continues to innovate and offer a growing variety of cryptocurrency derivatives.
You can see all existing products here To learn more about cryptocurrency trading, especially derivatives, click here: here.
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