Margin long – any reason to use for a pure bitcoin trader?
Margin long – any reason to use for a pure bitcoin trader?
I see the reason for going margin short to make profits from declining prices. However, I don't understand why a pure bitcoin (i.e. not Eth, no altcoins) trader would ever want to take a margin long position?
If I would have a diversified portfolio of both bitcoin and several altcoins I see how taking margin (long or short) positions on several of them simultaneously would be a way of effectively trading with more money than I have while at the same time balancing my risk on any of these leveraged positions by diversification.
However, if I only trade bitcoin, I would have only one open position at a time. (or would there be a reason to keep multiple open positions on the same currency pair?) In the context of forex trading, I saw the advice never to risk more than 2% of my portfolio on any single trade. If I consider that advice, e.g. for a 1:5 leverage, I could get exactly the same by simply investing 10% of my portfolio into bitcoin, unleveraged, with the added benefit of not having to pay the additional fees for margin trading. In fact, usually, I have way more than 10% of my trading account in bitcoin (unleveraged), sometimes I am all-in and I can simply sit through dips without doing anything; which would be impossible or at least highly risky e.g. when trading with even only 20% of my money on 5:1 leverage.
Thus, unless someone is gambling wild and putting more money than they actually have into a single trade (thereby risking margin call), there should be no use whatsoever for margin long positions for a pure bitcoin trader. Or am I wrong? Any explanation/perspective would be appreciated.
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