Margin Trading For Ripple (XRP) And Litecoin (LTC) Enabled In OKEx. Wednesday, November 7th
Margin trading for Ripple (XRP) and Litecoin (LTC) has been enabled in OKEx
They will be paired with Bitcoin (BTC)
Major cryptocurrency exchange OKEx has recently announced that two cryptocurrencies – XRP and LTC – will be paired with Bitcoin (BTC) for margin trading. Starting from November 6, users of the platform can engage in this type of operation with both coins.
“Dear valued customers: to meet the public demand, we will open the margin trading pairs XRP/BTC, LTC/BTC from 15:00 Nov 6, 2018 (HKT),” reads the announcement by the exchange in its official website.
What is margin trading?
While OKEx was already allowing regular trading for these tokens, the news may seem confusing for the newcomer in the token trading ecosystem.
Token margin trading differentiates from spot trading in that traders are not using their own purchasing power, but rather that of a broker. In other words, they are borrowing money from a broker to purchase more tokens that they could on their own. That way, a trader can earn even more money than sticking to the aforementioned practice.
However, higher earnings also comes with higher risks when margin trading. For example, let’s say a person has $10K in XRP held in his OKEx margin account, and want to buy about $20K in BTC (because he believes that coin will soon skyrocket). OKEx (as a broker) will lend that person the necessary funds so he can buy such quantity in BTC.
If the BTC goes up enough, the person might end up with about $30K in this crypto asset if he sells it. He then repays the broker the loaned amount (the other $10K in XRP plus interests) and keeps the remaining. This way, earnings were about 100% thanks to the leverage margin trading provides, compared to regular trading, where the same amount bought with his own purchasing power would have represented only 50%.
But, if the BTC goes down enough, then that person could be forced to sell their purchased tokens to prevent further losses. Assuming that he ended up with $15K in BTC, he would have to repay the loaned amount plus interests, and the remaining – about $5K – would represent a loss of half the original investment.
Because of this, OKEx reminded users to be careful when using this method. “As a friendly reminder, margin trading involves borrowing funds to increase your purchase power. It confers a higher profit potential but also greater risks. You are suggested to carefully evaluate your intended investments in light of your knowledge, experience, financial positions and objectives.”
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