A Quick Starter Guide to

Leveraged Trading at BitMEX

BambouClub
Mar 3, 2018

Save on BitMEX fees with this coupon. BitMEX fees are much
higher than on conventional exchanges because the fee applies to
the entire leveraged position, not just your margin. For market
trades fees are 0.075% of your position. So total fees on a $1,000
trade with 100x leverage are $150 [100 x $1,000 x 0.00075 x 2]. Fees
are 15% ! By signing up with this link will will receive two benefits: 1.
A 10% discount on the BitMEX fees 2. You will receive your own
Affiliate Link which you can use to generate a passive income. The
BitMEX Referral scheme pays out over $100 million annually and is
the biggest secret in crypto.

NEWS 31 March 2019: AntiLiquidation.com is a

BitMEX Anti-Liquidation Tool & Position Calculator.
This free tool will save you up to 70% of your capital
by avoiding liquidation. It also enables up to
700x leverage via tight Stop placement. Use it to
improve your PnL at BitMEX.

AntiLiquidation.com is configurable so you can input your own

risk numbers. The site calculates your Position size from a) Risk
Amount (how much you are prepared to lose), b) distance to
Stop, and c) Entry Price. A checklist takes you through the
structuring of a good trade that avoids all possibility of
Liquidation and ‘blowing up’ your account.
There is a a Guide to accompany use of the AntiLiquidation
tool: How to Use the BitMEX Anti-Liquidation Tool.

Other Guides:

How to Create Synthetic High Leverage at BitMEX with NO

Risk of Liquidation

How BitMEX Stop-Losses Can Save you 70% of your Capital,

and How to Set up a Stop

Short Bitcoin at BitMEX

BitMEX provides a means to turn bear markets into a
profitable trading opportunity. People say BitMEX is risky,
which it is when you don’t know what you are doing. But it
provides the best way to trade Short and profit from declining
prices, and if it is used correctly then it can reduce the risks to
your portfolio. (The acid test of whether you trade on BitMEX
responsibly is, while you might get Stopped out quite a lot, you
never get Liquidated.)
The global crypto market reached its peak on 8 January 2018 of
$828 billion, and then fell by 70% to $243 billion on 1 April
2018. People reacted in three ways.

a) Those who HODL’d (i.e. nearly everyone) lost 70%, assuming

they matched the market. Most traders under-perform the
market so they lost more than 70%.

b) Those who sold for USD in January did well — they preserved

their portfolio value measured in USD and increased it in BTC.

c) Those who sold their portfolios for USD and shorted Bitcoin
and ALTs though the first Half of 2018 made an additional
fortune to the one they made in the run-up to 8 January.

Two long-term, low leverage shorting opportunities. Bitcoin fell

from $19,864 on 17 Dec. 2017 to $6,139 on 6 Feb 2018. The, after a
Dead Cat bounce, it fell from $11,655 on 21 Feb 2018 to $6,734 on
1 April 2018.
Low-leverage shorting opportunities in the grey boxes.

So who was taking the greater risk, the HODLers or those who
made the effort to learn how BitMEX works and how to Short
on low leverage?

As an example, this Short trade made me a 500% profit at

BitMEX in the Bitcoin panic on 7 March 2018, the day of the
Binance API hack:
Register at BitMEX

Buy 1 Bitcoin with 0.1 Bitcoin Initial

Margin: Example of 10x Leverage
You can buy 1 Bitcoin ($11,670 at time of screenshot) with 0.1
BTC ($1,167) by buying a 10x leveraged position. You pay only
10% Initial Margin. You can also short the Bitcoin price (profit
from a fall in its price) by Selling the Contract. The most you can
lose is your Margin.

Set-up to buy 1 Bitcoin ($11,670) with 0.1 BTC

($1,167) Margin i.e. 10x Leverage Long
Set-up to buy 1 BTC priced at $11,670 with $1,167 at Bitmex.
(Ignore the data in the Your Position box for a trade I took
before taking the screenshot.)

The Place Order Box

Quantity: The quantity of the trade is $11,670. This is

your position. But the money you place at risk is less than this,
depending on what leverage you choose. The higher the
leverage, the less you place at risk, but the greater the
probability of losing it.
Cost: The cost is 0.1015 BTC i.e. $1,184.

Cost = Initial Margin+ (2 x Taker Fee)

Cost = (1/Leverage x Position) + (2 x Taker Fee)

= (1/10) x 11,670 + (11,670 x 0.0015)

= $1,184.50

This is the maximum you can lose. You lose the entire
amount should the price fall by 10% from $11,670 to $10,500. If
the price was to crash to $5,000 your loss is still limited to
$1,167 which is the value of your Initial Margin.

Order Value: The value of your position is 1 BTC i.e.

$11,670. (0.9889 BTC to be exact.) Fees are calculated on
this amount.

Available Balance: This is how much you have available for

trading. Costmust be lower than Available Balance to
execute the trade.

Profit & Loss Scenarios with

10x Long
Note that your profit can exceed 100%, indeed it is unlimited,
but your loss is limited to 100% (i.e. $1,167) , however much the
Bitcoin price falls.
Profit & Loss Scenarios with
10x Short

Again, as with the Long, your profit can exceed 100% by orders
of magnitude. (Profit is unlimited with Longs, but there is a
theoretical maximum limit with Shorts which is the profit when
the price has fallen by 100%, as the price cannot fall further and
become negative.) Your loss is limited to 100%, however much
the market rises.
This asymmetry (unlimited profit, limited losses) is the beauty
of the BitMEX Limited Risk contract, which is a BitMEX
innovation. Trading Futures Contracts on the CME or CBOT, for
example, there is no such limited risk facility. With standard
futures contracts the Exchange will Margin Call the client for
Maintenance Margin to supplement his Initial Margin when the
price approaches the Bankruptcy Price, and you can lose a lot
more than your Initial Margin. So you would get a Profit/Loss
Scenario like this for a Long:

Profit/Loss Scenarios for standard Futures that are NOT Limited

Risk. BitMEX Futures are safer to trade than standard Futures as Loss
is limited to Initial Margin.
The mechanics of the BitMEX solution are that BitMEX sets a
so-called Liquidation Price a fraction above the Bankruptcy
Price (in the case of Longs) or a fraction below the Bankruptcy
Price (Shorts).

When the market moves adversely against your position and

approaches the Bankruptcy Price, and breaches the Liquidation
Price, the Liquidation Engine takes over your position and
liquidates it automatically at market. It add any tiny profit made
by the Exchange to the Insurance Fund, or deducts any loss
made from the Fund.

Selecting Your Leverage

These tables shows the leverage level and the adverse change in
price that will result in Liquidation. The greater the leverage the
smaller the adverse change in price that will cause a
Liquidation.

Long: Liquidation price < Entry Price

Short: Liquidation price > Entry Price

The above tables show that Shorting is safer than going Long, in
that a larger percentage change (and USD change) is required to
cause Liquidation when you go Short than when you go Long,
for a given level of Leverage.
The above tables also show that even with the minimum 1x
Leverage there is a small but real risk of Liquidation when Long.
But there is no risk of Liquidation when 1x Short.

Use Maximum 25x Leverage

The BitMEX Exchange offers Long and Short leveraged trades
of up to 100x Leverage. Never use more than 25x because the
difference between the Liquidation and Bankruptcy Prices at
high leverage stacks the statistical odds against a winning trade.
Don’t worry about it at low leverage. This is explained in Why
You Should Never Trade 100x at BitMEX: The
Liquidation Price vs. Bankruptcy Price Gap Means you
Lose

Example: you buy a $9,255 100x leveraged XBTUSD position

with 1% margin, i.e. your stake is $93 of Initial Margin. Your
Bankruptcy Price (Entry Price less 1% Margin) is $9,163 but
your Liquidation price set by BitMEX is $9,240. The price just
has to fall $15 (0.16%) from your Entry to trigger your
Liquidation and 100% Loss. That is a trade for suckers. Trading
with 100% leverage on a repeated basis (Long or Short) will
inevitably result in losses. The BitMEX Insurance Fund wins. Its
current holding is 6,909 BTC, or $65 million. That money came
from salami-slicing the testicles of 100x bulls via the
Liquidation Engine.
Or Create Synthetic High Leverage
But you still want to try high leverage, right? For reasons
explained in this essay How to Create Synthetic High Leverage,
if you want to trade with leverage > 10x then don’t do it with the
Slider Bar. Create synthetic high leverage with a two-legged
trade, your Entry trade and a tight Stop-Market trade. (Tight
means close to your Entry Price.) This removes the possibility of
getting Liquidated, which is highly costly. You might well get
Stopped Out but this is less costly as you then make no charity
payment to the Insurance Fund. Always avoid selecting high
leverage from the BitMex Slider Bar. And always use a two-
legged trade: you Entry trade and a Stop order.

Selecting Market vs. Limit: Use

Limit Trades!
To use Market or Limit is one of your most important decisions.
It is not widely known that BitMEX charges extremely high fees
to takers (those who use Market tab in the screenshot) but
actually pays market-makers to trade (those who use the Limit
tab). A marker-maker is defined as someone who places a Limit
order and does not take the market price to open or close a
trade. For all Bitcoin contracts:

• Taker fee — 0.075% of total position

• Maker fee — 0.025% of total position Rebate

BitMEX fees for market trades are 0.075% of your total

leveraged position(not just your margin) for both entry &
exit.

Example:

Calculate total fees on a $1,000 trade with 100x leverage. i.e you
pay $1,000 Margin to open a $100,000 position.
Total Fees = 100 [leverage] x $1,000 [Margin] x 0.00075 [Rate
for Market order] x 2 [Entry + Exit] = $150

Fees are 15% of your $1,000 trade in the example. Why pay 15%
for market trading when BitMEX pays you 5% for trading with
Limit Orders? (An additional benefit of Limit trading is that
your trading is likely to be less frequent and more disciplined
and profitable.)

Note that fees for market orders have a massive effect on the costs
of trading at high leverage, less so at low leverage. Use Limit orders!

Save on BitMEX fees with this coupon

Your First $50 Trade
Trade with tiny amounts to start with to become familiar with
the BitMEX site. Then you can increase your leverage as you
gain competence. E.g. you might open a safe position of $100 at
2x Leverage which means your Cost is $50. This $50 trade is
illustrated:
A $50 Trade at BitMEX . Cost = 0.005 x $10,005 = $50

The most you can lose is the Cost: 0.005 BTC = $50. You lose
that if the market price falls 33% to the Liquidation price of
$6,693.

When you press Buy Market, this confirmation screen pops up.
Your order is not placed until you confirm Buy in this screen.
Risk Management
I suggest these practices in making your first few trades.
1. Deposit a small amount into your BitMEX account so that
even if you screw up you know the most you can lose. Maybe
0.05 BTC?
2. Concentrate on the XBTUSD Perpetual Swap and
become familiar with it. It is the most heavily traded market.
Starting out, ignore all other markets including the Bitcoin
Futures, the Bitcoin Upside and Downside Profit Contracts,
and the Altcoin Futures.
3. Set the leverage at 2x, 3x or a maximum 5x using the
Leverage Slider Bar. n.b. Do not select Cross on the
Leverage Slider Bar. This exposes your whole equity balance
and is risky.
4. Setting up your first trade, the field to pay particular
attention to is Cost. This shows the maximum that
you can lose. The cost must be less than the Available
Balance.

Watch the Market : BitmexRekt

Explained
When trading on leverage you do of course need to keep a close
eye on the market. Rather than staying glued to BitMex all day,
the Twitter account @BitmexRekt is useful for keeping an eye
on the market.

Take this Tweet as an example:

This Tweet indicates the XBTUSD market has experienced a

sudden drop. (If the Tweet says ‘Liquidated Short on XBTUSD:
Buy …’ then the market has risen quickly.)
When a Long position is liquidated it means the price has fallen
and breached the Liquidation Price. The BitMEX Liquidation
Engine then takes over the position and closes it by Selling
495,600 contracts at the market price.

1 XBTUSD contract = 1 USD on BitMEX. (Warning: Other

Futures contracts on BitMEX have different contract sizes. E.g.
the contract size of the ETH Futures Contract is 1 ETH, or about
$800 at time of writing.) So the trader who got liquidated for
495,600 Contracts lost a position of $495,600. He does not,
however, lose $495,600. The amount of his losses depends on
the leverage he was using. The greater the leverage, the smaller
the loss. With the maximum 100x leverage the loss is 0.5212
Bitcoin, about $5,700 or 1.15% of the $495,600 position.

11 August 2018: Save on BitMEX fees with this coupon. BitMEX

fees are much higher than on conventional exchanges because the
fee applies to the entire leveraged position, not just your margin.
For market trades fees are 0.075% of your position. So total fees on
a $1,000 trade with 100x leverage are $150 [100 x $1,000 x 0.00075
x 2]. Fees are 15% ! By signing up with this link will also receive your
own Affiliate Link which you can use to generate a passive income.
The BitMEX Referral scheme is a serious income opportunity: Open
an account at BitMEX.
That’s it. Good luck