Margin Trading Explained: How It Works and Why It’s Risky

When you use margin trading, a practice where traders borrow funds from a broker to increase their position size in crypto or other assets. Also known as leveraged trading, it lets you control more assets than your actual balance allows—but it also multiplies your losses if the market moves against you. This isn’t speculation. It’s borrowing money to gamble on price swings, and the house always has an edge.

Every margin trade needs collateral, your own crypto or cash deposited as security for the loan. If the value of your position drops too far, the exchange triggers a liquidation, automatically selling your assets to cover the debt. No warning. No second chance. In 2022, over $10 billion in crypto was liquidated in a single week during a market crash. Most of it was from traders using 10x, 20x, or even 50x leverage. You don’t need to understand complex charts to lose everything—you just need to believe the price won’t drop. That’s the trap.

Short selling, betting that a coin’s price will fall by borrowing and selling it now to buy back cheaper later, is a common strategy in margin trading. But it’s dangerous in crypto, where pumps happen fast and rallies can last for days. A coin can go up 300% in 24 hours, and if you’re short with high leverage, you’re done. No one gets rich from shorting memecoins on margin. They just get rich from the fees the exchange charges when you get liquidated. The platforms don’t care if you win or lose. They just want you to trade often and borrow more.

What you’ll find in these posts isn’t hype. It’s real stories—people who lost their entire portfolios chasing quick gains, exchanges that froze withdrawals during volatile swings, and the hidden mechanics behind liquidation engines that work like clockwork to take your money. You’ll also see how some traders use margin wisely, with strict risk controls and low leverage, and why those few survive while most don’t. This isn’t about getting rich overnight. It’s about understanding why you should stay far away unless you’re prepared to lose it all.