I

decided to create this guide as I found the whole BitMEX and margin trading
process to be daunting and very confusing when I first started. I hope that this
document can help people successfully trade and make profits on the BitMEX
exchange, but more importantly I wrote it to stop people getting REKT by margin
trading.

First and foremost – I am no way near a professional on Margin Trading,
Technical Analysis or Financial Advice! This guide is purely something I worked
on to help me get a greater understanding of the features, functions and options
the BitMEX exchange offers.

If you found this guide to be helpful and you would like to sign up to BitMEX,
please consider using one of the referral links I have listed below. The first
referral link is my own. If you feel you would like to give something back to the
author, use my referral link. The second referral link belongs to Vijay Sharma; he
has created an incredible TradingView indicator called FOMO, which works
extremely well with many coins on multiple timeframes. He has also taught me
many of the lessons needed to compile this guide. I’ve added his link here as my
way to say thank you to him.

Whichever you choose - You should definitely use one of these links, as you will get
a discount on BitMEX fees for the first 6 months of trading!

Crocketdile’s referral: https://www.bitmex.com/register/tW0WuV
Vijay’s referral: https://www.bitmex.com/register/xEne51


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Table of Contents
Margin Trading Theory ................................................................................................... 4
Terminology: ...................................................................................................................... 5
My BitMEX Process ........................................................................................................... 6
Limit vs. Market ................................................................................................................. 6
Leverage ............................................................................................................................... 8
Average Entry Price/Position ....................................................................................... 9
Stop Losses .......................................................................................................................... 9
How to set Limit Orders ................................................................................................ 12
How to Exit a Position .................................................................................................... 14
How to Chase Profits ...................................................................................................... 14
Calculator ........................................................................................................................... 16
Liquidation ........................................................................................................................ 18
Understanding Profits ................................................................................................... 19
Fee structure ..................................................................................................................... 20
Trading Advice for Newcomers .................................................................................. 21
Summary of Steps (For a basic trade) ...................................................................... 22
Intermediate Level Trading Concepts and Ideas .................................................. 23
Staggering Orders .................................................................................................................... 23
A Successful Staggered Trade Example ............................................................................ 25
Profit Stop .................................................................................................................................. 29
Wallet size .................................................................................................................................. 29
Leverage ...................................................................................................................................... 30
BitMEX resources and links ......................................................................................... 32

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Before I get into the options BitMEX has to offer, I highly suggest you enable the
FOMO Indicator on your TradingView charts. You can find all the information
needed for FOMO Indicator here: http://cryptonerd.info/

Other indicators I use on my charts are RSI, Stoch RSI, EMA’s and most
importantly trend lines from previous support/resistance zones. There are
multiple YouTube videos explaining the concepts behind all of these, so I won’t
clog up this guide with explanations. I predominantly trade the XBT Perpetual
Contract. So this guide will base itself around this contract type.


If you are new to cryptocurrency, or are not confident with the
features of how to trade cryptocurrency successfully, then I
strongly advise that Margin Trading is not suitable for you.
It requires particular attention, caution and advanced elements
of risk management. Anyone using the information offered in
this guide does so at his or her own risk.

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Margin Trading Theory

The theory behind margin trading is pretty simple. You acquire a certain amount
of contracts for a certain price, watch them go up or down and sell them back at
the new price. You keep the difference between your buy/sell price. It works in
both directions; you can make money when the price is falling, just as you can
when it is increasing.

An example:
You buy (go LONG with) 10 XBT at a price of USD6000.
Your position is LONG 10 XBT x USD6000 = 60,000 Contracts.
The price of XBT increases to USD7000.
Your profit is: 60,000 x 1 x (1/6000 - 1/7000) = 1.4286 XBT

Say the price dropped to USD5000 instead:
Your loss would have been: 60,000 x 1 x (1/6000 - 1/5000) = -2.0 XBT.

Notice how your loss is greater? This is due to the inverse and non-linear nature of the
contract. So the opposite applies if you went SHORT instead. Your profit would be
greater if the price moved down than the loss if it moved up.

In the example above the 1 refers to your Leverage. So if you had 10x Leverage you
would have made 14.286 XBT on the LONG, and lost 20 XBT on the SHORT.

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Terminology:

So let me begin this guide with some terminology that was foreign to me when I
began margin trading.

Contracts - Contracts are what we trade. Think of it as the actual amount of a
stock you’d like to trade. On the XBT Perpetual Contract: 1 XBT = USD1

Leverage - A multiplier for your trades. BitMEX offers up to 100x leverage.

Limit - An order type where you set the price at which you desire to Buy/Sell.
Placing this type of order will attract a Maker Rebate (See below).

Liquidation - A price point determined by your margin, leverage and current
contract price whereas, if reached, your entire position will be closed
automatically. AKA. Getting REKT!

Long - Going LONG on a trade means that you believe that the price of the stock
will increase.

Maker - A term used to describe those users who place their orders through the
Limit option. A rebate is paid to Makers. To qualify for a Maker Rebate, your
order must actually appear on the orderbook.

Margin - The total equity you hold within the exchange or within a position.

Market - An order type where the price you Buy/Sell at is given by BitMEX based
on the current orderbook. Placing this type of order will attract a Taker fee
(See below).

Orderbook – Where all the current orders are waiting to be filled. Having an
order sit on the Orderbook will mean you qualify as a Maker and are paid a
Maker Rebate.

Position - When you’ve entered a trade (Short or Long) your position details the
amount of contracts you are trading, the entry price, your liquidation price,
and your margin.

Short - Going SHORT on a trade means that you believe that the price of the
stock will fall.

Stop Loss - An order you can set to close a portion of, or your entire position,
should a certain price be reached. Usually used to set a price point that you
are willing to absorb a loss. A golden rule of margin trading is to set a Stop
Loss to avoid Liquidation. Also known as SL or Stops.

Taker - A term used to describe those users who place their orders through the
Market option. A fee is charge to Takers.

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My BitMEX Process

I like to keep my trading pretty basic. I feel that having 100’s of indicators
clogging up charts makes my decision making process harder. When I first look
into margin trading for the day - I go straight to TradingView and open up the
Daily chart and look at:

- The last few FOMO Indicator signals to see whether there has been movement
one way or another.
- The RSI. If it is above 70 or below 30 I know that it's oversold/overbought.
- The Stoch RSI. It's a great indicator to show you when the trend will slow down
and possibly reverse.
- The EMA's. If the candles are using the EMA's as support/resistance this helps.
- Any trend lines I have on my chart.

I then do the same for 4 hour, 2 hour, 1 hour, 15 min and 5 min. You'll be able to
see trends if they all have super low RSI or something in common. Then if the
stars align you're in business. 90% of the time they wont all say the same thing.

So, then I put it down to different timeframes. If I am planning to be trading a for
a longer period of my day, say 5-8 hours, I go solely off the 1 hour chart. If I want
my trade closed in under half an hour I'll use the 5 minute. This one isn't great
for showing trends though and can be quite risky.

Limit vs. Market

Throughout this guide you will hear me refer to a Limit Price and a Market Price.
I much prefer using Limit Prices as that way BitMEX pays me to place my entry
and exit orders thought their Maker Rebate (explained later). Market Price is a
quick way to enter and exit the market but will attract a Taker Fee (also
explained later).

To have an order qualify as a Limit Order it needs to sit on the Orderbook and
not be filled instantly. Any orders that are instantly filled are classified as Market
Orders. This can become confusing and frustrating sometimes when you place a
Limit Order too close to the current price and it fills as a Market Order thus
attracting Taker Fees.

Figure 1: The Yellow text shows me that my Limit Order is on the Orderbook.

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The image below shows you the zones you need to be placing orders to make
sure they enter onto the Orderbook. Make sure they are a few dollars between
your entry and the current price. A little trick I use is to look at the other orders
on the Orderbook and try to set my entries a slight bit before the larger orders.
In the image below if I wanted to set a Short, I would set it at 6358.5, so I can
beat that larger order of 636,000 contracts, as it may halt the price movement.

For a SHORT order you want to enter a price ABOVE current price.

For a LONG order you want to enter a price BELOW current price.

Figure 2: Where to place your Limit order to ensure it enters Orderbook.

Think of it in the terms of your trade:

LONG
“I believe the price will Increase. Therefore to make the most amount
of profit, I want an entry price as LOW as possible to begin my trade”

Or

SHORT
“I believe the price will Decrease. Therefore to make the most amount
of profit, I want an entry price as HIGH as possible to begin my trade”

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Leverage

BitMEX offers an option, called Leverage, to increase your position size. The way
leverage works is pretty simple. Say you have 0.1 XBT in your BitMEX wallet, you
can set your leverage to 10x and any position you open with your entire balance
would act as if it was a 1 XBT position (0.1 x 10 = 1).

Leverage multiplies your gains and also your losses. High leverage trading seems
like such a lucrative strategy for newcomers. However, the amount of losses
incurred by new traders using high leverage is astounding.

You may be thinking, “Why don’t I just set a 100x position and wait it out until I’m
in massive profit?” Well, BitMEX has a process in place called Liquidation (I will
explain Liquidation in more detail in another section below). In basic terms
liquidation is when your position reaches too far into negative returns, enabling
a liquidation engine to kick in and exits your position for you before you hit total
bankruptcy. Leverage plays a big part in determining the level at which this
process initiates.

The table below highlights how close the liquidation price is to your entry price
at different leverage. It’s blatantly obvious that using high leverage produces a
risk level that is just not worth it. For example, on a 50x Long at 5000, you’d be
liquidated when the price moved just 73.5 points against you. A single long
wicked candle would wipe you out.

XBT Price
5000 7500 10000
1x 2605.5 3760 5013
2x 3344.5 5017.5 6689
5x 4184.5 6277 8368.5
Leverage

8x 4464.5 6697.5 8929

10x 4566.5 6850 9132.5
15x 4710 7065 9420
25x 4831 7247 9662
50x 4926.5 7390 9852.5
100x 4975.5 7463.5 9950.5
Figure 3: Liquidation levels for different entries and leverages.

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Average Entry Price/Position

BitMEX only allows you to have one position for each contract type (XBT,
XBTZ18, ETH, EOS, etc.). This means that regardless of how many orders you fill,
your entries will always be averaged into one single position.

Here is an example that we can follow along with:

I enter a Long order at 5x leverage, for 10,000 contracts at 7000.
My orders completely fill.

My position is now: Long 10,000 XBT @ 7000, 5x.

Let’s say that the XBT price is decreasing, but I still believe it’ll go up
further. I would like to enter some more contracts into my total position,
so I place another order for 10,000 contracts at 6800. I haven’t touched
the leverage slider, so I am still using 5x for my leverage.

Once my new order fills I would have only ONE position, which will be an
average of all my orders.

My position is now: Long 20,000 XBT @ 6900, 5x.

I cannot have a Short position open while I have a Long position open, and vice
versa. Any Short contracts I wanted to purchase would come out of my current
Long position.

In regards to leverage, every time you touch the leverage slider it updates the
leverage on your current position. You cannot have an average of leverage. The
slider acts in real time automatically to your position. Providing you have enough
margin in your wallet, you can adjust it around. But for new traders I highly
recommend not touching the Leverage Slider Bar once you are in a trade.

Stop Losses

Before I even look at putting my money into a trade, I will set up my Stop Losses.
This is a crucial part of margin trading, especially so with leverage in play. A Stop
Loss will save your position from ever approaching huge losses or worse,
LIQUIDATION!

This is one section where BitMEX has us all tied up in an unpleasant situation.
Now, I absolutely hate paying Taker Fees (I’ll explain these in detail later in the
guide), but the Stop Loss process makes it almost unavoidable.

Here is an example that we can follow along with:

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I am Shorting 1000 XBT contracts with an Entry Price of USD6100. I would

want to set some Stop Losses at a price above 6100 just in case the market
moves upwards.

Let’s say I set a Stop Limit order at a Stop Price of 6230 and a Limit Price of
6235. The theory behind this being that: If XBT reaches my Stop Price; it’ll
place an order for me to Buy (Close my position) at 6235. However, as this
order is above the current price of XBT, it’ll just cancel the order.

So my only hope for the Stop Limit order to make it to the Orderbook is to
have the Limit Price below the Stop Price (for a Short, obviously above for a
Long). Example: Stop Price 6230, Limit Price 6225. I then have to hope that
XBT falls down slightly after hitting my Stop Price. Only then would I achieve
an order on the Orderbook assuring myself a Maker Rebate.

This would only work if the price of XBT were crawling upwards slowly. As it
goes upwards, it slowly retraces and comes back down a few dollars, just
enough to hit my Limit price.

As this type of market movement is unlikely when XBT goes on a pump
upwards - I would have a Stop Market order set up at 6235 to be used as a
safety stop. That way if XBT shoots straight past my 6230/6225 Stop Limit,
my 6235 Stop Market would close the trade for me (unfortunately attracting
Taker Fees, but I’d be safely out).

I have demonstrated the placement of the Stop Losses below

Figure 4: Stop Limit/Market placement attempting Maker Rebate upon exiting failed trade

The reason for the Stop Market is just in case the price of XBT is pumping
upwards massively. Imagine that my Stop Limit order gets placed at 6230, but
because the market was moving so fast the price of XBT is now 6300. So it has
skipped over my order and I’m stuck in a position I do not want to be in. This is
where the Market order will come in handy as a last resort safety measure. It will
sell no matter what the price of the market is and release me from my position.

Setting a Stop Limit or Stop Market wont cost you anything. You can set 100 of
them and they’ll just cancel themselves out if they hit. I highly recommend
making sure the Close on Trigger box is checked. If not, when your Stop hits it
will open up an opposite position for you.

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Figure 5: Ticked if I want Stops to close positions only.

When you set a Stop Limit before you have an active position you will get this
warning dialogue box asking you if you are sure that you want to place this Stop
order.

Figure 6: To make sure you don't open another position.

Once you have a Stop in place, you’ll find it appears on the Open Orders pane.
You can manually adjust this Stop at any time by clicking on the numbers and
moving them up or down, then accepting your changes. This becomes very handy
when you have a Stop set and the price is getting close to activating it, but you
can see the activity is dropping off. So you want to adjust your Stop by a few
dollars to remain in the position.

Figure 7: Adjusting your Stops is simple using the up/down arrows and Enter key.

I found that the best way to understand the mechanics of Stop Limits was just to
set a few and play around. Practice with 1 contract and absolutely nothing can go
wrong then.

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How to set Limit Orders

Opening a position with the Limit tab is far more beneficial than using the
Market tab. You will get charged a Taker fee using Market orders, whereas you
will get paid to set Limit orders (known as a Maker rebate, more about this
later).

I really don’t understand why anyone would be using the Market option. Sure, it
is quick and it’ll get you into the trade instantaneously, but if you are doing
BitMEX correctly, you should have planned your entry with solid TA and not
need to jump in hastily. This is where FOMO (the horrible mentality, not the
awesome indicator!) will get the better of you.

Figure 8: The different order tabs - Limit and Market.

To set a Limit Order you need to first select your desired Leverage. I highly
recommend nothing over 10x when you are first starting! Yes, the higher
leverages can seem tempting, but the losses from them are increased greatly, as
is the fee you may pay. You use the Leverage slider to choose a Leverage point.
Once you have set your Leverage don’t touch the slider again, as it will apply any
changes you make to your open position! I have learnt this one the hard way.

Figure 9: Leverage slider. Anything above 25x is not recommended for new traders.

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One of the most important things with Limit Orders you need to be aware of is
that your order needs to hit the Orderbook before it’ll be recognised as a Maker
Order and give you the rebate. If you set the order value too close to the current
price BitMEX perceives this as a Market order type and you will absorb the Taker
fee. The Taker fee is quite substantial and can eat into any gains you make on the
position. So set your price at least a dollar or two away from the current position
to ensure it reaches the Orderbook.

You will know that your order is on the order book in two ways. The first way is
on the Orderbook pane itself, signified by yellow text. It shows me that my order
is in the group of orders at 6522.0.

The second way is by looking at the Depth Chart. See the little green dot? That is
my order waiting on the Orderbook ready to fill. Say this order filled, I would
obtain my Maker Rebate and BitMEX would pay me to place this order. As a side
note, exiting positions also works the exact same way. Make sure to exit at a set
Limit price to obtain another Maker rebate and assist your profits as opposed to
eating into them with Maker Fees.

Figure 10: Orderbook showing my order. Depth Chart showing my order.

A neat little trick to make sure you ALWAYS get a Maker Rebate is to have the
Post Only box ticked. That way, when you place your Limit Order, if it was going
to fill against resting orders (at Market level) it will cancel your order instead.
This tick box is a safe guard against slipping into an order at Market price even
when using the Limit Order function.

Figure 11: Keep this box checked to always ensure Maker Rebates.

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How to Exit a Position

There are a few ways you can exit your trades and secure those gains. One of the
easiest is to look in the Positions pane and find the box at the very end that says
Close Position. You can input a specific value in this box, click Close and a Limit
Order will be placed for you to close your position.

Again, there is the option to exit at Market price, but as we are smart traders, we
don’t want to use Market entry and exits. Make sure that your Close Order makes
it to the Orderbook so you can get the Maker Rebate again, as opposed to paying
the Taker Fee to exit.

Figure 12: Exiting a trade using the Close Position box.

How to Chase Profits

In my opinion, one of the trickiest things is picking an Exit from your trades
when they are in profit and when you’ve made a mistake and they are in loss. TA
can help you decide on an area where you think a price movement will slow, or
turn around completely. So you should definitely base your Exit off
predetermined price points.

However, there are times when the price goes beyond your expectations and
anything from there on are just further profits for you. So you will want to chase
these profits with an Exit Strategy just in case the price reverses and starts
climbing back to previous levels, which would eat into your profits.

A tactic I use for this is to keep adjusting my Close Position order by increments
as the price is moving in my favour. Once I am happy with my profit I will place a
Close Position order just a bit above/below the current price level (depending if
I’m Short or Long). That way, if there was a reversal, my position would close on
my Limit Order and I’d be in profit.

It is also handy for times when the price stays on track and keeps falling/rising
past the point I was already happy with. I can make further gains from the level I
was already willing to accept. So I will keep adjusting the Close Position order
every time the price drops another 2-5%. Keep in mind that this market moves
in waves and after the up there will be a down. Pick your targets by looking at
the way the market is moving and adjust accordingly.

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BitMEX also offers a Take Profit option. This works just the same as a Stop Limit
order, but is used when the price is moving in the direction favourable to you. Set
it the same way you’d set a Stop Limit Order, but just remember that you are
going towards those numbers.

Take Profit Orders are great for when you want to exit a portion of your position.
A good way to lock in those profits, but still keep a foot in the game just in case
the price moves even further from your entry point.

In my example below I am setting a Take Profit Order to close a Short position
that is already in profit. When the price reaches 6524 a Limit Order will be
placed for me to close my position at 6520. Remember to leave a bit of breathing
room here so when your order is placed it hits the Orderbook, to lock in that
Maker Rebate and avoid that horrible Taker Fee.

Figure 13: Setting Take Profit Orders.

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Calculator

BitMEX offers a great little tool to help you trade in the form of a Calculator. This
handy tool should not be overlooked and can be found next to the Place Order
pane.

Figure 14: BitMEX Calculator.

Before I enter any positions I input some numbers to realise the definitive areas
of each trade. The Calculator can show your current Profit/Loss (PnL), Target
prices at set percentage levels, and your Liquidation price. The slider button in
the top right is used to tell the Calculator if you are in a Long or Short position.
Then just enter some digits and the Calculator will update the values on the right.

Profit/Loss is great for working out Stop Limit levels. Say you want to risk
falling 2.5% before a Stop Limit comes into play. You can use this tab to find the
level to place your Stop Orders.

Figure 15: Profit/Loss calculator.

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As we are intelligent traders, we will understand that small gains can make a
huge difference when a lot of them are added together. The Target Price tab lets
you work out the Exit price needed to achieve a certain percentage level. I use
5% as my standard, then once I reach this level start chasing with Take Profit
Limit Orders or manually adjust my Close Position as the market continues to
move in my direction.

Figure 16: Target Price calculator.

Nobody ever wants to get liquidated - It is a dagger through the heart!
Fortunately BitMEX helps you avoid liquidation by showing you the price point
at which they will take over and sell 100% of your order and you will lose
everything (AKA. Liquidation!). The Margin slider here refers to trading with
Isolated and Cross Margining. Isolated just means that you can only lose
whatever is in the margin of the current position. Cross Margin allow BitMEX to
draw more balance from your wallet to avoid liquidation.

Figure 17: Liquidation Price calculator.

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Liquidation

In the event that your trade doesn’t go the way you have predicted and in-fact
gets incredibly far from your projected price points, BitMEX has formulated a
solution to assist your position from reaching total bankruptcy – Liquidation.

Say you are in a Long position. You have your Entry point; anything above this is
Profit for you. Below this Entry point BitMEX calculates a Liquidation zone that
sits slightly above total Bankruptcy

Figure 18: Liquidation point for a Long trade, set just before Bankruptcy.

There is a load of processes that are enabled when a position is being liquidated.
Liquidations usually occur when the market makes sudden pumps or dumps and
people haven’t set Stop Orders to protect themselves. You will notice in the
Orderbook that Red text will appear on the orders. These are positions that have
been taken over by BitMEX and are currently being liquidated.

For much more information on the liquidation procedure I suggest you check out
https://www.bitmex.com/app/liquidation and familiarise yourself with the
processes behind it.

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Understanding Profits

We are trading to make profit, obviously. So it makes sense to understand how to
decipher the BitMEX code on comprehending your total profit. When you have
an open trade have a look at the Open Positions tab. There are two sections to
the right that relate to your profit (or loss) – Unrealised PNL (ROE%) and
Realised PNL. PNL stands for Profit and Loss; ROE stands for Return On Equity.

Unrealised PNL shows you how much your trade is currently ahead (or behind).
So it is basically saying how much of a return you currently have in this trade if
you exited at that point. Green means profit, red means loss.

Realised PNL shows you total profit (or loss) that you have taken out of the
trade, or ‘realised’ since beginning the trade. This number is added to (or
subtracted from) every time you execute an Exit Order type (Close, Stop Loss,
Take Profit).

Figure 19: Unrealised and Realised PNL.

At the end of each day your total realised PNL from all the trades throughout the
day are combined and entered into your wallet as a positive or negative amount.
You can view these entries by going to: https://www.bitmex.com/app/wallet

Figure 20: Realised PnL's from previous days. Unrealised PnL from current trades.

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Fee structure

BitMEX is a business and they exist to make a profit for themselves. They do not
charge for Deposits or Withdrawals, so they make their money in the form of
Fees applied to every trade. However, the BitMEX fee system can be utilised in
your favour, as there are two types of fees charged: Maker and Taker fees.

A Maker fee is actually a negative fee (a rebate) paid to those users who place
their orders through the Limit option. A Taker fee is charged to those users who
place their orders using the Market option. This is the same for both Opening and
Closing positions.


Taker fee is 0.075% of your total position at Open AND Close.

Maker fee (rebate) is -0.025% of total position at Open AND Close.



I have highlighted this, as there really is no reason for you to be paying a Taker
fee if you are trading in a smart way.

An example:
The price of XBT is currently USD6000. You want to go Long as you believe that
the price will increase. You enter a Limit Order at a level a little BELOW 6000.
That way your order will be placed on the Orderbook waiting to be filled. If you
have had put an order within a few dollars of 6000, chances are it would be filled
at Market Price and you’ve just cost yourself 0.075%.
So you are -0.075% before your trade has even started!

The fees I have listed above are current for XBT at the time of writing this guide.
However, the Alt Coins available to trade on BitMEX use a slightly different fee
structure: Maker Fee (rebate) is 0.05% of your position, Taker Fee is 0.25% of
your position!

The figure below is a small-scale test I completed to describe the Maker rebate.
You can see I was paid for both my entry and exit. The other rebate I received
was from the funding BitMEX applies on a regular basis. I won’t explore this
Funding in this guide, but you may notice ‘Funding’ on your Trade History.
Basically if the funding rate is negative, Traders in Short positions will pay a
small fee to Traders in Long positions.

Figure 21: Trade History details all trades and fees paid. Notice the Maker rebate for Limit Orders.

You can view your fees and transactions by going to your Trade History on the
BitMEX site, or by clicking this link: https://www.bitmex.com/app/tradeHistory
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Trading Advice for Newcomers

I found the best way for me to determine whether I was grasping the concept
was to Paper Trade. The way I achieved this was to determine the price point I
wanted to enter either a Long or Short trade. I would enter all of the details into
the BitMEX Place Order section, but just not press the Buy/Sell button. BitMEX
would tell you the details of the trade and I’d write them on a spreadsheet (you
could literally use a piece of paper too).

Once the trade developed I would see where my position had taken me. I found I
was getting my Entries pretty close to the turn point and by following the FOMO
Indicator I was making some very profitable trades. I did this for a while (well, I
still do this when I am feeling hesitant!) and noticed how much better my trading
was becoming.


Sign up to BitMEX’s TestNet site to have a try of Margin Trading with fake
money. Just be aware that the site is very laggy and using TA may not give you
the same experience as using TA on BitMEX’s main site. It is a great way to
understand the functionality of BitMEX though.

testnet.bitmex.com


Join the BitMEX Discord group at https://discord.gg/sJfPsc6
Here you will find a great community and some of the most helpful margin
traders around the world. We also have professionals stop by from time to time
who offer advice on trades and market sentiment. Great insider info to base
trades on!


The Twitter account @BitmexREKT is interesting to watch when the market is
moving rapidly. It always seems to drum into my head the importance of Stop
Losses and how quickly a ‘sure thing’ can change.

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Summary of Steps (For a basic trade)

1. Check TA to determine whether a profitable trade looks likely
a. Revise all timeframes
b. Look at FOMO Indicator for Trend Reversal or Buy/Sell Signals

2. Determine an Entry point and decide upon risk level
a. Higher Leverage = Higher Risk
b. Potentially decide upon an Exit point before going into trade if TA
suggests an obvious trend reversal
c. Use Calculator to determine target areas for Exit and Stop Loss
d. Fully understand all target areas of your trade and make an Exit
Strategy should the trade not go in your favour

3. Set up Stop Loss system
a. Set Stop Limit, then a Stop Market as a safety backup

4. Enter Limit order at least a few dollars away from current value to
ensure your order goes onto the Orderbook

5. Once in the trade, Monitor the current trends and market movement as
the trade evolves

6. Once the trade starts to reach profitable points consider Taking Profits
a. Either manually adjust Close Order or set a Take Profit Limit

7. Exit trade in profit once your target is reached or the market trend starts
to reverse
a. If the Exit is due to a Stop Loss trigger – determine what went
wrong and use it to benefit your future trades



8. Appreciate your newfound profits by spending time with your loved ones
and friends (Not a part of the Margin Trading Process, but why make all
these gains if you can’t enjoy life?)

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Intermediate Level Trading Concepts and Ideas

By now you have the basics of how to place Limit Orders, Stop Losses, Take
Profits and the major features of BitMEX. I now want to introduce some more
advanced concepts that you might like to explore once you fully grasp the
fundamentals of margin trading.

My advice for staying profitable when exploring more advanced trading is this:

Less trades per day.
Lower leverage.
Staggered entries.
Take profits.
Trade off solid support/resistance lines.
Don’t trade against the trend.

If you can follow these rules, then you are well on your way to making successful
trades. I still believe that picking an entry is by far the toughest part of trading.
No matter how many indicators you use, or how carefully you research and plan
your trades, you never know when a whale may pump a price or a random bit of
FUD news hits the market. So you want to enter your trades safely.

Staggering orders great Risk to Reward ratio when entering a trade. It involves
staggering your entries with a stop loss above/below your last Limit Order. This
strategy is perfect for when you believe XBT is rising/falling to a point and will
then fall/rise sharply once it hits this point. Such as in a Bull/Bear flag situation.

Staggering Orders

To determine the amounts of contracts I will set for each Limit entry I would
input my maximum order price and check how many contracts I could purchase.
For example, let’s say it was 8000. I then start to place orders at half the value of
the order above it, starting with the first order at half the total I could potentially
do (4000, 2000, 1000, 500, 250, 250). I could keep halving, but I’ll eventually get
to tiny numbers and I am happy with having 6 staggered levels. Add those
numbers up and I’ll get a total of 8000.

I would definitely want to set a Stop Loss somewhere above/below the largest
order on my staggered list just in case. Thanks to the weighted staggering, by the
time all of my entries have been filled I would have an average entry price pretty
close to the current price. So my Stop Loss would be able to remain quite close to
my last entry price and only have a small percentage of loss for my entire trade.

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Let me explain this with an example:

Current price of XBT is 6250 and I believe that I have identified a Bear Flag
after which XBT will fall; however at the current moment XBT is slowly rising.
My TA displays a point of resistance at around 6350 before it’ll start to rapidly
fall.

The image below illustrates exactly how I would stagger my Limit Orders and
position my Stop Losses.

Figure 22: Orders staggered every 20 points at half the amount of the order below. At the top line
you can see what my Average Entry Price is (6350.5).

This method represents a very safe trade. I accumulate on the way up, and then if
XBT turns downwards I have a position with an average entry close to the turn
price. I also safeguard my position with a Stop Loss close to the final Entry price
due to the staggered nature of my entry points. This strategy coupled with a
staggered Take Profits exit plan is very robust and has a low risk to reward ratio.

A neat little trick I use when I stagger my entries is to plot them on my 15 min
Trading View chart as highlighted in Figure 23. As a very visual person, I find
that this method gives me a very good representation of which orders have hit
and which ones are still waiting. The numbers to the left represent the amount of
contracts in each order.

I set the visibility of the lines and number text to 15 min only. That way they do
not clog up my 1, 2, 4 hour & Daily charts when I am searching for trend
reversals. Setting the objects to show on 15 min only is easy. Either double click
them, or right click and use the visibility tab to choose your range (see image
below). A time saver I use here is to save my visibility parameters as a Staggering
Entries Template in the Visibility tab. That way I don’t have to adjust the slider
each time.

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Figure 23: TradingView 15 min chart showing staggered entry positions of orders.

Figure 24: Visibility tab lets you select which timeframe objects appear.

A Successful Staggered Trade Example

I have been making good gains lately by sticking to a similar strategy as the
Staggered Strategy I mentioned above. I will outline it here, step by step using an
example of a profitable trade I made. I feel this strategy isn’t that hard to stick to
and a lot of people could benefit from it, especially since it uses lower leverage
(in my opinion, using high leverage is the reason a lot of new people make poor
trades and struggle on BitMEX).

Start by finding yourself a good trading opportunity, making sure your TA is
robust, as risk free as possible and with a high probability to play out. Look for a
strong support or resistance and confirmation on the FOMO Indicator as well as
other indicators or oscillators. This is by far the hardest part of the trade to get
correct. You’re much better off not trading, than trading on a weak signal or
moment.

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I initiated the trade outlined below as I saw a strong sloping trend line was
approaching, which almost intersected another resistance line. Further
strengthened by the fact that a psychological resistance of 8500 was approaching
(whole numbers seem to attract a lot of attention, so I place my orders a few
dollars away from these barriers). FOMO Indicators all suggested that a reversal
was about to happen too.

My thought process was that I could fill staggered Short orders up until the
sloping trend line, approximately 8495, and have a Stop Loss set above it and the
psychological 8500 mark. It worked perfectly for me. I will demonstrate this
process below:


1. After deciding upon the trade – Go SHORT from 8500 – I worked out
how many contracts I could put into this position with the amount of
margin I wanted to risk. The way I did this is by setting my leverage; I
used 8x for this trade, and put my lowest entry point, in this case 8336,
into the BitMEX Limit order section (Limit Price). I adjusted the Quantity
section to show me how many contracts I could buy (in the Cost section).
For this position (8x leverage at 8336) it told me that 45000 contracts was
my maximum.

2. For this particular trade I set my entries 30 points apart at 8336, 8366,
8396, 8426, 8456 and 8486. I do not always use 30 points, but this trade
suited it perfectly.

3. I like to work with 4-6 staggered entries per trade. Any more means that
by the time the last one hits, you’ve chewed up a lot of potential profit by
chugging through the first few.
How did I decide to use a 30-point spread?
When I wanted to start this trade the current price was approximately
8300. By using the 8500 resistance it gave me a 200-point spread.
Dividing 200 by 6 gave me 33. As I like to use easy multiples for my
entries I decided upon 30.

4. I then went to my TradingView chart and started visualising my trade. I
did this by placing yellow Horizontal Rays on my chart. I used the 15
minute timeframe and set the Visibility to 15 minute only (explained in
the previous section) so the rays didn’t clog up my other timeframes.

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Figure 25: Visualisation of my trade. Yellow lines represent Entry points. Red line represents Stop
Loss. Purple arrows represent where I thought the market was going to move. White and Blue lines
are my trend lines. Orange star represents where the market was when I decided to set up this trade

5. I then worked out how many contracts I wanted to place at each entry
point. I did this by starting with 1000 on the lowest entry point (1000 on
8336), then adding the previous number to the one before it.

1000 + 1000 = 2000
1000 + 2000 = 3000
2000 + 3000 = 5000
3000 + 5000 = 8000, etc.

As I got higher I juggled the numbers around a bit, subsequently applying
much more weight to the final entry.

6. The next step for me was to go this website:
https://www.online-calculator.org/stock-average-calculator.aspx

7. The calculator on this website let me input each of my contract amounts
(Shares Bought) and entry levels (Purchase Price) to then work out my
average purchase price (Average Cost).
Note: BitMEX does this for you, but only once you have entered all your
orders into the system. I prefer to set up my Stop Losses before entering
any orders.

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Figure 26: Working out Average Cost of entries.

8. After I worked out the Average, I then used the BitMEX Profit/Loss
Calculator to find what my Stop Loss would be.

9. I then entered a Stop Market, Stop Limit and all my Limit Orders and
allowed the trade to develop.

10. My orders all got filled as XBT went higher, the direction of XBT turned
and I had a great position with a very safe Stop Loss system in place.

11. All I had to do then was choose an Exit point.

In this actual trade I adjusted my Stop Losses to be below my entry point once
XBT had fallen as a safe guard to lock in profits. In the end my Close order filled
at around 8180 and I walked away with a very successful trade.

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Profit Stop

I use a technique that I call a Profit Stop. It’s nothing advanced, just a Stop Loss
that I set when my trade has gone in my favour. Think of it like an insurance
policy to lock away your gains.

The way to use it is set a Stop Loss above/below your entry price (I use the same
Stop Limit/Stop Market set up mentioned earlier).

An example:

You enter a Long trade at 6900.
The price moves to 7100. Your ROE shows some pretty significant gains.

These gains are meaningless if the price drops back to 6800 now, unless
you can lock them in or insure them with a Profit Stop.

You would set a Stop Loss at 7000. That way if the price retraces back
down towards 6900, your position would sell at 7000 and you’d have
secured a whole load of profit.

This technique works if a trade turns and goes completely against you. I don’t
suggest that you place an order, have it fill, price moves $20 and then you chase
it with a Profit Stop. You should trust your TA and targets and stick to them
unless things change.

Wallet size

Once you start making gains you’ll eventually find a position size that suits your
trading style. Then once you’ve made some more gains you will realise that you
are trading with profits made from your previous trades.

You are now in the fortunate situation that you can reduce a lot of risk by
removing some of your XBT from the exchange and either converting it back into
fiat, or keeping it in cold storage. If you get into the habit of removing your trade
gains every time you make a good trade you’ll ultimately have your original
deposit returned and locked away, then you can disconnect yourself fully from
your XBT wallet balance and trade completely emotionless.

I have personally found a wallet size that suits my trading style perfectly. I try to
keep my available balance on BitMEX equal to this amount. When I make positive
trades I remove the gains from BitMEX and reset back to my desired wallet size.
Yes, I could increase my gains if my position sizes were increased, but I feel it
would change my trading style and I could potentially become greedy which
could affect my overall trading clarity.

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Leverage

I just want to talk about leverage quickly to get a concept across that I had no
idea about when I was a new trader. If I had have understood this earlier, I’m
sure it would have alleviated some of my earlier liquidations.

When you are in a trade there is a panel in the BitMEX UI that shows you how
much margin and leverage you currently have in the trade and the orders
waiting.

Figure 27: Margin display, showing Position & Order margin and leverage.

This panel shows you exactly how much margin your current trades are using
and at what leverage in relation to your whole account balance. You can see my
trade above is using 20% of all the funds available to me at a leverage of 2.05x.

Running a high leverage:low margin trading style doesn’t really do much for
your gains. You get the same returns from using a low leverage:high margin
style, but the benefit is that your liquidation price is drastically reduced.

An example:

Let’s assume you have 1 BTC in your BitMEX account.

You enter a Long position when XBT is 7000 at 50x leverage with 10% of
your account balance (0.1 BTC). Your liquidation price for this position
would be 6898.

Now let’s recreate this example with a lower leverage, say 25x. Since we
halved the leverage, we’d double the margin to get the same position as
before.

You enter a Long position when XBT is 7000 at 25x leverage with 20% of
your account balance (0.2 BTC). Your liquidation price for this position
would be 6764.5.

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I’ve used the BitMEX calculator to show the returns on the position mentioned
above. Please note that the contract amount is slightly different, but the margin
used is exactly what my example above applied.

Figure 28: Returns showing different leverage and margin.

The ROE % looks much better in the 50x leverage position, but don’t let that fool
you. You make double the % on half the position size. Meaning with the 25x
leverage position you’d make half the % on double the position size. It all comes
out to be the same.

The point I am trying to make here is that on the 50x position your liquidation
would be 6898, whereas the liquidation for the 25x position would be 6764.5.
You gain nothing but a boost to your ego by having a high ROE %.


The downside to using more of your margin means you have less available to
increase position size or add more margin to your trades. However, I believe that
by having a planned trade is much better than increasing position size if the
trade starts running away from you. Also, having a liquidation price as far away
from your entry is beneficial in the times when BitMEX has Server Overloads and
you don’t have the ability to add margin, increase contracts or close positions. I’d
much rather play it safer and have my liquidation price point as far away from
my entry as possible.

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BitMEX resources and links

Below I will list some of the resources and links I use to base my TA, targets,
strategies and trades on. Some of these are quite random websites that I have
stumbled across over a period of networking. Therefore some may be biased, or
even completely false. So, my advice is, as always: Do Your Own Research!

The Useful Links page from my own Cryptocurrency website that I originally
created to help my Dad get into crypto. Links on this site are more focused to
general crypto, not specifically Margin Trading.
https://www.crypto-simplified.com/useful-links/

Significant trades through BitMEX.
https://tucsky.github.io/SignificantTrades/#

Calculator website for working out staggered average entries.
https://www.online-calculator.org/stock-average-calculator.aspx

Tether Wallets containing huge amounts. I keep an eye on this one to see
whether large amounts of Tether have been moved. Usually this signals a
significant movement will take place on the price of XBT.
https://wallet.tether.to/richlist

This website lists the current prices of XBT/BTC on multiple exchanges.
https://cryptowat.ch/assets/btc?page=2&types=spot+futures

Shows positions of top traders on BitMEX. I use this page to show me the current
sentiment of BitMEX traders.
https://coinfarm.online/position/position_realtime.asp

A multitude of data relating to price, positions and ratios on the BitMEX platform.
https://datamish.com/d/000000004/btcusd?refresh=20s&orgId=1

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Enjoy BitMEX and Margin Trading!

The most important element is to make educated and smart
trading decisions. Always choose the safer option of lower
leverage and taking profits. BitMEX has severely REKT a
multitude of people who have traded foolishly!





This guide was compiled by Davey Jones, AKA Crocketdile, specifically as an
educational tool for people interested in the BitMEX margin trading exchange. It is
my absolute pleasure seeing margin traders making well-educated calls, sharing
knowledge and subsequently benefitting themselves and the community with some
nice gains.

Should you desire to provide some form of a thankyou, a tip to my BitMEX BTC
address would be great! Minimum deposit on BitMEX is 0.0001 XBT.

My XBT Wallet address is: 3BMEXhVbiTd1JNpTVah3VvYtVFNoAXemzL

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