There are many platforms for trading bitcoin and other crypto currencies, but if you want to make complex transactions, trade derivatives and use leverage the safest option is Bitmex.
This platform gives traders the chance to leverage in Bitcoin and other currencies. This means we can trade up to 100 times our funds in a single trade. This, of course, brings risks but also benefits.
Now, what is leverage?
Leverage means trading with borrowed funds. When you leverage, Bitmex is lending you Bitcoins so you can invest a bigger amount than your own funds. It implies bigger fees, as you have to pay the transaction fees plus the loan costs. You can find more information here.
How to register at Bitmex?
User registration in Bitmex is simple, from its website, on the home page, you can see two options that say “Register”, either you can enter.
As it is a platform that only operates with crypto currencies, registration is much simpler. It will only ask for your email address, password, country, first name and surname. And accept the terms and conditions. Once you have entered the data, click on “Register”.
Once you have done these steps, you just need to check your email and click on verify your account so it is validated and you are ready to trade on this exchange.
How does Bitmex work?
Let’s clarify this first: you don’t actually buy bitcoins at Bitmex, you are trading perpetual swap contracts. A Perpetual Contract is a derivative product that is similar to a traditional Futures Contract, but has a few differing specifications:
- There is no expiry or settlement.
- Perpetual Contracts mimic a margin-based spot market and hence trade close to the underlying reference Index Price.
- This is in contrast to a Futures Contract which may trade at significantly different prices due to basis.
- The primary mechanism to tether to spot price is Funding.
Let’s translate it to natural English so we can understand it. Suppose we think Bitcoin price is going higher and we want to bet on it. You can place a buy order (“to go long” or “to long”) so another user buys it or you can directly buy an already placed sell order. And what if you think price will go down? You can in that case trade the opposite contract: a sell one (commonly know as “to go short” or “to short”).
Two things to remark here:
- As you see, Bitmex doesn’t buy anything from you neither sells you anything. Bitmex just offers the platform and all the trades are peer to peer. You need to find someone that wants to buy your order; fortunately, Bitmex is a very liquid marketplace with a lot of users.
- You can either buy/sell an already placed order (that is, a “market” order) or place your own buy/sell price order (what is called “Limit” order). We strongly recommend to place a Limit Order, as fees for market orders are 3 times higher than Limit Orders fees.
So, once you are in you can see the home with several sections. For this tutorial purposes we have highlighted the main areas you are going to use:
- Left column, top: here you can place your buy/sell orders. There are three tabs:
- Limit: you introduce the exact price you want to buy/sell contracts. This is recommended when you are studying the charts and you think it will reach one price and then it will reverse, so you place the order in advanced.
- Market: you buy/sell the contracts at the price the market is offering now (limit orders other users placed at actual price).
- Stop: Once you have your long/short contracts already bought, here you set the price you want to sell them. You can choose several types of Stop orders:
- Stop: limit, market o trailing. This is a safety net: in case your prediction goes wrong and price goes the opposite direction, you insert the price at you want your contracts to be sold, so you stop losing money. Limit and Market we already know what it is, but what about trailing? Trailing stop is a dinamic stop order. You set the distance you want the stop order be to the actual price, so in case it goes well and you start earning money the price of the stop order moves accordingly and in case the price changes direction it finds the stop price earlier instead of going to the original price and losing more money.
- Take profit: limit or market. This is the maximum profit you are going to earn, so once this price is reached your contracts are sold. This way, you don’t leave your contracts open at the risk of the price reversing and losing the money you were earning.
- Left column, middle: Here you can see your position: open contracts and ROE (Return on Equity, that is how much you earn or lose on your investment). Also the leverage you are using. More about leverage later.
- Left column, bottom: last stats for the contract you are watching now (XBTUSD in this screenshot): actual price, 24 hours volume, price change in last 3 hours…
- Middle, top: available contracts. In this case we are watching XBTUSD (Bitcoin/USDollar), the most used one. But you can choose to invest on Cardano, Bitcoin Cash, Ethereum and others.
- Middle, middle: Orderbook: open limit orders (red: sell/short contracts, green: buy/long contracts) and last traded price
- Middle, bottom: Chart with price evolution. You can see the candlesticks for the price and below the columns for the traded volume.
- Right, top: Depth chart: this is the same as the orderbook, but in a visual way.
- Right, middle: Your status:
- positions: already bought contracts
- closed positions: previously closed contracts
- active orders: limit orders that you have placed but haven’t been bought yet because the price hasn’t been reached
- stops: any open stop order, wether is a stop or a take profit order
- fills: list of completed trades (only the last 100 are shown here)
- history: list of all your orders, even cancelled that were not completed
Longing or shorting on Bitmex
So now you want to buy or sell some contracts, that is, to go long or short. It’s not so difficult: go to the first section, on the left column top:
Choose the type of order: limit, market or stop order. Insert your quantity in USD dollars and the limit price (advisable). Then you press wether the green button (buy/long) in case you think the price is going up or the red button (sell/short) in case you think it’s going down.
Below you can see the cost of the contract (the fees) considering the leverage you are using (below), the order value in XBT (XBT is the original ticker for Bitcoin, it changed to BTC later on but some exchanges and webpages still use XBT) and your available balance.
Below you have 4 options:
- Post-Only: A post-only order will not execute inmediately against the market. Use to ensure a Market rebate. If it would execute against resting orders, it will cancel instead.
- Hidden: Hidden orders do not display in the book.
- GoodTillCancel: The time in force for this order. Default is GoodTillCancel (remains active until either the order is filled or you cancel it). Other options here are InmediateOrCancel (any unfilled portion left inmediately after placement is canceled) or FillOrKill (the order will only execute if its full quantity can be inmediately filled).
- Reduce-Only: if checked, the order will only reduce your position, not increase it. When to use it: if you have a long position open and sell some contracts to go short, if reduce-only option is checked you will be cancelling the longs but if the short position you are entering now is bigger than your open long position it will only cancel it, it won’t go short with the remaining contracts.
Once you click on buy or sell, you will see the following screen. Please note that the transaction will not take place until you confirm the purchase:
Once confirmed you will be able to see the order in your status section. First in “Active orders” and once that the order is filled (someone buys it) it will appear in “Positions”. In that same section you can close the order, at market or at a given price.
We highly recommend, once your order is filled, to put at least a stop loss, so you can leave your desk and rest assured your position will not be liquidated or you will not enter in a big loss. If you are clear about your targets, it’s advisable to also put take profit orders, so your position will be closed when they are reached.
What is leverage?
Leverage is an investment strategy of using borrowed money to increase the potential return of an investment. This way, you can invest more bitcoins than you actually have, but don’t forget fees are higher, as you have to pay for the whole amount you are investing and also for borrowing the bitcoins.
Depending on the cryptocurrency you are investing there are different options of leveraging at Bitmex. For XBTUSD, for example, you can leverage up to 200x, that is, you invest 200 times the bitcoins you have. This multiplies your profits but also your losses. If you trade with a 100x leverage a 1% move of the price in the right direction will make you double your balance. But if your prediction is not correct a 1% move in the opposite direction will make you a 100% loss and your position will be liquidated, lossing all your money. There are rumours Bitmex manipulates prices in order to liquidate positions, but it appears it only happens with high leverages (50x – 200x).
Leverage trading can be very profitable but is also very risky, so we don’t recommend to use it until you are more experienced and even then start using small leverages (2x – 5x).
Trading at bitmex can be complicated at first, as it gives you many options that you can’t find in other exchanges. But once you get used to it and feel comfortable it’s a good exchange to trade, specially if you are an advanced trader. But remember not to use high leverage since the risk of being liquidated and losing all is very high.