Bitmex Advanced Margin Trading Guide

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Warning: margin trading is not suitable for beginners. If you’re new to margin trading on Bitmex, make sure to initially read over our guide “The Idiots Guide to Margin Trading on Bitmex” first. The guide covered here is for more advanced Bitmex trading topics.

Bitmex has long been the “go to” platform for margin trading Bitcoin and other various altcoins. If you don’t already have an account, well you probably shouldn’t be reading this guide now should you? 😉 However, if you’re looking to run before you walk, you can proceed to read over this guide (like anyone’s going to stop you), but I recommend you at least sign up for an account before you do.

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So let’s start off with a few advanced features that you may not be too familiar with on the Bitmex exchange.

Stop Limit, Stop Market, and Trailing Stop Loss

stop losses on bitmex margin tradingIf you have any trading experience whatsoever, you should already know what a stop loss is so I’ll skip the formal introduction. If you’re not too familiar with stop losses, I highly recommend you check out this guide “Stop Losses VS Mental Stop Losses”.

Moving on…

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Let’s take a look at the 3 stop losses that Bitmex provides for you and when you should use each one.

stop limit on bitmex margin trading with leverageStop Limit – when setting a stop limit on long trades, you always want to make sure that your “Stop Price” is lower than your “Limit Price”. Do the exact opposite for your short trades. This ensures that you exit your trade at the proper price point. By how much is up to you, but I do recommend a decent range between your stop price and your limit price. The closer these two numbers are to each other the less likely your order will get filled.

I personally recommend using a stop limit when you’re close to your computer. This way you can at least keep an eye on things, pay lower fees, and exit out of your trade in case your stop limit gets skipped over. If you’re not by your computer and still insist on using this feature, make sure to use a broad range between the limit and stop prices.

One of the key benefits to utilizing a stop loss limit is the fact that you’ll be paying minimal fees on your trades. Sometimes you can even receive a rebate on your funding fees depending on if you’re going long or short during an opposing bullish or bearish market. I’ll cover more about this below under “Fee Calculations and Funding Rates”

stop market bitmex trading marginStop Market – I don’t think it takes a genius to figure this one out. Stop market stop losses are the exact opposite of stop limits. Unlike the stop limit mentioned above, using this feature will ensure that you exit a trade and don’t suffer any more losses then you need to. This is a true “fail safe” stop loss as it will never get skipped or unfilled.

The main take away to utilizing the stop loss is the fact that it guarantees you an exit out of a trade. The downside to using the stop market is that you’ll pay more in fees. You may also exit a trade at a higher or lower price than the actual “stop price” you originally set if the market is moving at an extremely fast pace during this time.
<image>

This can be a great solution for those who have a lot of money on the line and need a guaranteed way out of a bad trade. I’m not one to tell you which one to use, as that’s more of a personal preference (it can be situational one as well).

trailing stop loss bitmexTrailing Stop Loss – a trailing stop loss is an advanced trader’s best friend as it dynamically moves according to the current price movement.

A trailing stop loss will follow the current price action by a designated set price. This is best explained with a few examples.

You’re currently trading BTC at an entry of $7500 and set a “Trail Value” of $100. The market moves up to $7700 and then dips to $7600. You’d be stopped out at this point. You would have also made $100 profit as opposed to losing your funds if the dip kept moving past your entry point.

As you can see, this is a highly effective feature that Bitmex gives you which no other cryptocurrency exchange offers. This will allow you to keep your losses to a minimum. It’s also great for those more riskier traders who like to use higher leverage (above 20X).

The key takeaway to this type of stop loss is that it allows the Bitmex system to constantly babysit your trade by following the price point around like an angry cobra. The moment the price dips, the trailing stop loss quickly snaps it up and exits you out of the trade.

The downside to this is that you may be stopped out before a major rally in price. However this goes for any stop loss you may choose to use. The feature will also stop you out at the market price, so you’ll be paying a bit more on fees.

Now that we’ve covered all the stop loss features, let’s discuss the “Place Order” features you may not be familiar with.

Reduce Only

reduce only bitmex margin trading featureA pretty simple and useful feature, the “Reduce Only” tickbox will allow you to close out your trade without opening up a new position on the opposite side of the market (I call this inverse trading). This is best explained with an example. <image>

Let’s say you start a long position for $1000 at entry price $7500 and set a sell limit to exit out of your trade at $7600 for $1000 (using the sell/short button). However, in your haste, you accidentally input an additional zero, thus opening a short for $9000 ($10,000 sell/short quantity – your long trade of $1000). This type of mistake could have dire consequences on your trading account funds.

When checking the “reduce only” feature, the Bitmex system will not allow you to execute the trade and will immediately cancel out the additional $9000 that would have put you in a short trade. The feature will still execute the trade but only utilize $1000 worth to exit you out of it.

This is an extremely useful feature that can get you out of trouble and should be checked unless you actually plan on opening an immediate “inverse trade” upon your exit (long to short or short to long). I cover more on this within the advanced Bitmex trading strategies below.

Post Only

This feature should be used at all times. When checking this box, only limit orders will be allowed to execute your trades, thus saving you a ton on fees. Look at this feature as a safety precaution from accidentally creating a market order (being a taker, and not a maker).

Using Cross Margin

cross leverage margin trading on bitmexLeaving the leverage margin bar to the far left will allow you to utilize the Cross margin feature. Unlike isolated margin, where you have to manually input the amount of leverage you would like to use for your trade, cross margin uses your entire Bitmex balance as collateral.

This also saves you the time of inputting a leverage amount and calculating a quantity that corresponds to this leverage. These are two key aspects to isolated margin trading that you’ll have to take into consideration. Simply adjusting the leverage slider will not change the amount of contracts that you’re actually trading. It will only raise or lower the limit that you’re allowed to trade with. This is better explained with an example.

Let’s say you have $500 in your Bitmex account, and you want to trade with $5000 worth of BTC contracts. With isolated margin, you would have to move the leverage slider to 10X and then input the quantity to $5000 (this figure would be a little lower due to trading fees).

With cross margin, all you would need to do is input the $5000 into the quantity box and Bitmex will calculate it as 10X leverage off of your $500 account balance.

Most of the time, you want to use cross margin for your trades. Make sure that you never go over 10X leverage (20X is pushing it). For beginners, I highly recommend you keeping it to 2-5X.

However, there are occasions where you want to use isolated margin. Let’s say you like to put in a few day trades but only want to risk $100 of your account balance at 10X leverage for a total of $1000. Seeing that you have $500 in your Bitmex account, you would merely move the slider to 2X. This way if you get liquidated, you only lose $100 off your total account balance.

Personally speaking, I don’t trust myself to only use a set amount within my account balance, so I only fund my Bitmex accounts with an amount I’m willing to lose when using cross margin trading. This is because cross margin won’t get you liquidated as easily as isolated margin, as long as you’re not too crazy with that leverage. This is also the leverage type that most professional traders use for that exact reason.

Tip: I recommend opening 2-3 Bitmex accounts, since all of them are anonymous (no KYC needed) and fairly easy to start up. Fund each account with $500 to $1000. This way, if you’re having a bad day and there’s a massive swing against you (like 8-15% in the opposite direction of your trade), your entire t uprading capital doesn’t get annihilated.

Unrealized and Realized PNL

unrealized profit and loss on bitmexUnrealized PNL is related to the Mark Price. The Mark Price is what determines your risk management of your position on Bitmex. This means that when you get liquidated due to the price going against you, it’s due to the fact that Mark Price has crossed the liquidation price threshold. This will prevent you from getting liquidated from a sudden price swing on Bitmex’s local platform as the Mark Price is comprised of several other exchange values.

Bitmex has a reasonably complex way of calculating the Mark Price which can be found here. It uses a combination of Bitcoin to USD Spot Index (which is 50% Bitstamp and 50% GDAX) as well as the depth of the order book.

Realized PNL is simply what your current profit and loss is according to Bitmex. You’ll receive this figure by hovering your mouse over the Mark Price. This is the real price that showcases your real profit and loss.

unrealised profit and loss on bitmex

Fee Calculations and Funding Rates

contract details of funding rate on bitmexBitmex calculates these much differently than any other cryptocurrency exchange. When looking at the Contract Details box, if the fee is displayed in red, long positions will have to pay the fee. This means that there are more long positions than short at that moment.

On the other side, if the fee is displayed in green then Long positions receive the fee. When you hover your mouse over the “funding rate” you’ll see a predicted rate for the next eight hour period.

This rate is in regards to the funding rate and does not take into account the maker or taker fees for placing the trade. If you exit your trade within this eight hour period, you will not have to pay the funding fee.

Tip: keep an eye out when this fee is about to go into effect. Many traders will exit the market (thus shorting) around 30 minutes or so before the fee hits their account. This would be a great opportunity to buy in and take advantage of a long trade as soon as the fee period ends. When time properly, this can be easy money.

Bitmex Advanced Trading Strategies

1.  Scaling In and Out of Your Positionno matter if you’re going long or short with your trade, scaling in and out of position is highly recommended and utilized by most advanced traders.

In order to get the very best possible position for your entry and exit positions, you need to layer them (aka scaling in and out). Let’s say you’re trading with $1000 and want to take a long position at $7500 on Bitcoin. The current position is at $7800.

Instead of watching the chart all day and trying to time that five minute window in order to get the closest price to that $7500, you would simply set 3-4 entries on the way down.

This would look something like: $250 at $7700, $250 at $7600, $250 at $7500 and $250 at $7400 in case you catch a long wick down.  Now, all the entry points may not get filled as the price may only reach $7600, however you’ll be at an advantageous entry point with capital in the trade.

The opposite goes for your exit positions. Let’s say your ideal exit position is at $8000. You currently have $1000 in the trade at an entry position of $7500. You can scale out of your position by setting exit points at $7700 exiting with $500, $7850 with $300 and then $800 with $200. Again, this will allow you to both enter and exit the market at the most advantageous price points as well as accumulating the most profit along the way.

tradingview scaling into entry point
click to enlarge

Note: this is not only a margin trading strategy, but a typical advanced trading strategy that you can use for any cryptocurrency exchange.

2. Use stop losses when trading top and bottom ranges – this essentially means that if your trading at a top or bottom of a particular price range, you want to ensure that you have a stop loss in place in case your strategy is not fulfilled.

To put this into perspective…

Let’s say you spot an inverse head and shoulders, however it’s located near the top of a 3 day price range. You want to set a stop loss at a key level to where you don’t get stopped out before a major rally, however still within range to exit you out of the trade if the market turns against you.

Using the stop loss will allow you to take advantage of the charting patterns while still giving you a safety net in case the strategy doesn’t end up going the way you had planned.

The same goes for entering a trade with a short when you’re at the bottom of a 3 to 7 day average. Make sure you place a stop loss above your short, but at a price level that you know won’t get prematurely stopped out before a major dip ensues.

This is best illustrated with a chart…

stop losses on bitmex trading range margin trading
click to enlarge

3. When to Use Market & Limit Orders – for an overwhelming majority of your trades, you’re going to want to use limit orders with the “post only” feature checked. However, there are occasions where you’re going to want to use market orders.

For example, utilizing “stock market” stop losses are highly recommended when using one of the strategies above, but especially when you’re not close to your computer or watching the market.

For everything else, stick to limit orders and keep those fees to a minimum.

4. Using Inverse Trades – the beauty behind margin trading on Bitmex is that you can immediately cash out of a long with an immediate inverse short trade.

For example: let’s say the current 3 day price range for Bitcoin is between $6200 and $6800. You’re currently exiting a long trade with $1000 at $6800 from an entry of $6600. Instead of exiting the trade with a short of $1000, you can input $2000 into the quantity box and immediately start a short trade upon exiting your long.

I only recommend doing this when you’re at the bottom or top of a 3 to 5 day price range. The chances of your trade reaching a peak and reversing is much more likely than creating a new ATH (all-time high). This is best outlined with an illustration below.

trading long and short trades on bitmex
click to enlarge

5. Playing Both Long and Short Trades Simultaneously – A strategy that some of the more advanced traders use on certain occasions is to set both a short and long limit. This can be used in times where you’re unsure which direction the market is about to break out to. It’s also good to use for trading patterns like a symmetrical triangle.

In these cases, you’ll need to have 2 Bitmex accounts available. On one account, you’ll set up a long entry point above the potential breakout. On the other account, you’ll set up a short entry point below the potential breakout. This way you’re setting yourself up to take advantage of the breakout in either direction.


Another similar scenario you could use this strategy is…

If the price movement reaches a high from a 3 day moving period (like the $6800 price point covered in the example above). You can place an inverse trade to short at this peak as well as set a limit order to go long on the trade in case of a major breakout. Again, you’re covered on both sides of the spectrum.

bitmex margin trading with leverage account limits on buy and short

Great Job! We’re Done Here…

I hope you enjoyed my advanced Bitmex trading guide. Using just a few of the strategies I covered above will allow you to create an incredible income for yourself in a much shorter time frame than it would typically take trading on any other cryptocurrency exchange. This is due to the fact that you’ll not only be able to multiply your trading capital with leverage, but also have access to both long and short trades as well.

Remember, initially trade with small amounts until you get acclimated to the platform. Print this guide out and keep it close by for when you need it.

Save 10% on BitMEX fees with this coupon link. BitMEX fees are MUCH higher than your typical crypto exchange because the fee applies to the entire leveraged position, not just your margin (initial deposited amount).

As always, if you have any additional strategies you would like to share or questions concerning other aspects Bitmex trading, please feel free to leave a comment below. I’m typically quick to reply.

Good luck and happy trading!

If you’d like to read more about Bitmex trading strategies, check out our other guides…

The Idiots Guide to Margin Trading on Bitmex

Bitmex Liquidations: How to Avoid Getting REKT

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