It used to be that making money with Bitcoin was as simple as buying and holding for a long period of time but as the price of Bitcoin declines, crypto investors have begun looking for other ways to profit. This is where BitMEX comes in. It’s recognized as the clear top platform when it comes to wanting to short Bitcoin – which is essentially making money as the price of Bitcoin goes down (going long is betting that the price goes up, which you can also do on BitMEX). Another advantage BitMEX has over many other exchanges is the ability to do leveraged trading, which allows you to play with more money than you actually have (up to 100x more). By borrowing money from the exchange and using your funds as the collateral in case the price movement goes in the opposite direction of your position.

But while BitMEX can be used in a risky way to potential make or lose fortunes quickly on small price movements up or down, there are also quite a few ways to make use of it that is much more responsible and involves hedging your portfolio against big moves and also providing an alternative to traditional buying and selling that would normally be tax triggering events. We’re going to cover all of this and more in this guide, so read on below and follow along this guide if you want to get started with the exciting world of BitMEX.

Why BitMEX?

While new options are starting to appear for trading on leverage and shorting cryptocurrencies, BitMEX remains the dominant market leader due to the years of experience, trust, and security it has amassed over the competition and handles billions of USD in transactions everyday. BitMEX, which stands for Bitcoin Mercantile Exchange,was founded in 2014 by HDR Global Trading Limited and constitutes of a talented and transparent team that includes former banker Arthur Hayes who can regularly be found doing interviews on channels such as CNBC. They have never been hacked, their platform is very fast & clean, and operating in Hong Kong and the Republic of Seychelles they are in a jurisdiction that is pro-crypto. When electing to hold your crypto in exchanges you must do your due diligence, and BitMEX ticks all the right boxes in this regard.

Setting Up A BitMEX Account

The first thing you’re going to need in order to get started is head over to the BitMEX website and register an account, using our special link above you’ll be able to save on fees for the first six months at no extra cost to you. One of the great things about BitMEX is that it doesn’t require any KYC so you’re able to get started and make full use of the platform right away without disclosing anything about yourself or where you’re from. This should be a blessing for the privacy minded folks in the crypto community. BitMEX is not technically open for registration in every country so what some people do in order to still use the site (who’re for example on vacation in the US) is use a compatible VPN service like NordVPN or Opera Browser ‘s built-in free VPN and bypass this restriction this way.

Enable Two-Factor

We would highly encourage that soon upon registering an account to enable Google’s Two-Factor Authentication in order to up your level of security and ensure no one can get in your account without having access to your phone. This is done under “Account and Security” under your account settings in the top right.

Making Your First Deposit

To be able to make use of the exchange you’re naturally going to need to transfer some money over. While you can trade multiple different cryptocurrencies on BitMEX, they only accept Bitcoin so that is the only currency of choice to be able to use the platform (even if you’re for example wanting to long or short Ethereum). Head over to your account settings and press “Deposit” and send the amount of BTC you wish to be able to trade with to your personal address that’s provided as shown in the example below:

How To Trade On BitMEX

Perpetual Swaps

Depending on the network congestion it might take a bit for the BTC you’ve transferred to arrive but BitMEX will let you know with a notification as soon as it does. Once the funds have arrived in your account, you’re ready to go!

There are a few number of different trading options available on BitMEX but the most popular one and the one you’ll likely be most interested in is the Perpetual Swap. A perpetual swap essentially leaves your long or short position open indefinitely until you close it (or until it gets liquidated aka you lose all the money you’ve risked on the trade) as oppose to normal futures trading where the contract closes at a predefined date. That means you can open a position and close it as soon as a few seconds or as late as a few years, it’s all up to you. Do note that there is a small funding fee that is taken (or given depending on market condition and whether you’re short or long) every 8 hours but we’ll cover the costs/fees aspect further down the guide.

Currently on BitMEX only Bitcoin and Ethereum (limited to 50x leverage) have Perpetual Swap trading so if you’re looking to trade other cryptos like Cardano, Bitcoin Cash, EOS, Litecoin, Tron or Ripple then you’ll be limited to more traditional Futures contracts that expire at a given date.

Your First Trade

The best way to learn how the system works is making a real life trade with a small amount. All the action takes place in the order box in the left hand sidebar and we’ve broken down all the bits you need to worry about to place your first order. You can see the screen below after logging in and pressing the “Trade” link right next to the big BitMEX logo on the top.

1) The first thing you’re going to want to do is select the crypto that you wish to trade in. In our example it will be Bitcoin so clicking on the Bitcoin tab will make sure everything you’re doing in the window regards buying and selling Bitcoin contracts.

2) As mentioned before there are different types of futures trading options but the one we are interested in is called Perpetual which should automatically be selected so you’re fine as long as you didn’t misclick somewhere.

3) When you’re placing an order you can either place a Limit order or a Market order. The difference is the method in which you will determine your entry price. Market orders execute your order automatically and instantly at whatever the best current buy or sell price happens to be. The advantage of this is in the speed of execution as you don’t wait for your orders to be filled. However the disadvantage is that it invokes a fee (0.075% FEE as opposed to a 0.025% REBATE for Limit orders which means you’re actually making a small amount of money). Unless you have a specific reason to want to execute an order as soon as possible (like some time sensitive breaking news you’ve learned that will immediately impact the price of BTC), it is recommmended to use a Limit order in order to save on fees.

4) The quantity field refers to the quantity of contracts you wish to transact in and is denominated in USD so 1 contract = 1 USD (this is true when trading Bitcoin but not necessarily other markets). This is the amount of USD that you will actually be playing with and this is what is used when calculating your fees and profits and such. So if you go long $1000 worth of contracts and the BTC price goes up 10%, then you will make $1000 x 10%= $100 in profit before factoring in fees. This is not the amount that you’re actually risking to lose (that amount is shown below the buy/sell button under “Cost”) and depends on how much leverage you’re using to trade with this amount. If you’re trading at 1x (and thus not using any leverage) then you will be risking exactly the amount you specify in this contracts section but if you for example choose 10x leverage then you will only be risking roughly 1/10th of the amount you’ve entered in this quantity section (and the cost section should mirror that but calculated in BTC).

5) As you might have inferred from step 4, the leverage amount you choose is very important in determining the level of risk you wish to undertake. You can choose any amount from 1x to 100x (and you can specify custom amounts not displayed in the slider by clicking on the pen icon next to ‘100x’ and inputting your desired leverage there). While high leverages allow you to trade with big amounts (actually with amounts much more than you actually have in your account) there is obviously also quite a big tradeoff in that you’re exposing yourself to liquidation. Liquidation occurs very roughly when your “leverage multiplier” x “% your trade is down” = 100%. So for example if your short entry price was when BTC was at $7500 (box number 6 in our original screenshot) and you used 10x leverage, then your liquidation price will be around when the price goes up 10% (because 10x leverage multiplied by 10% in wrong direction = 100% and thus liquidation) or ~8250$. This is a very simplistic view of how liquidation is calculated and there are some different factors that changes this calculation so make sure to check your liquidation price by hovering around the question mark inside the buy or sell buttons shown in step 7.

6) As we mentioned in step 3 we are doing a Limit Order so the price you want to execute at will need to be determined by you here.

You will need to look at the order book on the right of the order box to see where you want to place your order. If you’re buying (going long) and want to quickly execute your order then you’ll want to place your Limit price just at or below the amount displayed at the top of the bottom half of the order book (so <=7282 according to screenshot above). If you’re selling (going short) then you will want to put a Limit price that is just at or above the amount displayed at the bottom of the top half of the order book (so >=7282.5). Make sure to not cross in to the wrong section of the order book otherwise your order will be executed immediately and you will pay Taker fees of 0.075% just as you would if it was a market order (there will be a popup warning you of this should you attempt it). You can tick “Post-Only” in the order box if you want to deliberately avoid this possibility.

If you’re not in a hurry to take a position and are actually waiting for the price to get to a certain level before you long or short, then you can specify your desired figure here and the order will eventually fill itself should it come to the limit price you chose.

7) The final step after having filled out everything mentioned above is pressing either the green buy/long button or the orange sell/short button. A confirmation screen will appear and once you confirm that your order will go ‘live’ and either immediately execute if you have a market order or execute when conditions are met if you’ve used a limit order.

Unfilled orders will display under “Active Orders” as in the screenshot below. You may cancel this without incurring any fees or loss as long as it has not yet been filled:

Once your order has been filled, it will show up under “Positions”:

Closing Your Positions

When you want to close your positions to either cash-in the profit you made or to limit your losses, there are a few ways to go about this. Remember that if you went short, you will need to buy to close your position while if you went long you will need to sell. The simplest way is if you happen to be staring at your positions tab as illustrated above there will be a section to the far right that says “close position”.

Setting a Stop Loss

If you press the orange “Market” button, it will exit your position at whatever the price is right now. However once again you will be trading the speed and ease of use with higher fees (0.075%). Therefore once again unless you’re in a big rush it is recommended to place a limit price here and press the “close” button in order to pay less fees and you will exit your position once the price gets to the amount you’ve entered.

Putting a limit close order is fine if your trade is going in the direction you wish but what about if the price ends up moving in the opposite price you bet on. You will want to put a stop loss and protect yourself from losing too much. There is once again a limit and market option for setting your stop loss which you can find at the top left of the screen in the order box.

When it comes to stop losses, market orders (instead of limit orders) are actually recommended. Below is a stop market loss in which 10 contracts would be bought (place the same amount of contracts here as your initial order if you want it to stop loss your entire position) should the price reach $8000 or above. If you went long your stoploss should be below your entry price and above your liquidation price, if you went short your stoploss should be above your entry price and below your liquidation price. Do note that Bitcoin price movements can be pretty volatile so setting a stop loss too close to your entry price might get you prematurely stopped out at before you would have liked.

Last Price vs Index/Fair/Mark Price

At the very least you should always place a stop loss JUST before your liquidation price so that you actually stop yourself out before you get liquidated (BitMEX takes a lot of fees when processing liquidations so you’ll want to avoid them). You can of course set your stop loss way before and limit the maximum amount you can lose should things not go your way. You can even set multiple stop losses at certain intervals and buy/sell a certain amount of contracts at different intervals should you wish to do so.

So far all the prices we’ve been discussing and looking at revolves around the BitMEX order book and the price in the middle of the order book is referred to as the “last price”. While this is the price that is used when calculating your eventual profit/loss settlement, it is not the price that is used for triggering liquidations. There is a lot of different terms used like Fair Price, Index Price, Mark Price but basically all you need to know is that in order to prevent manipulation and forcing people into liquidation, BitMEX uses roughly the average price between Coinbase Pro, Kraken and Bitstamp exchanges over a small period of time to trigger liquidations. So even if the last price happens to reach your liquidation price for a split second on BitMEX it might not actually force you into liquidation if the prices on Coinbase Pro, Kraken and Bitstamp exchanges don’t ever reach that point.

BitMEX Fees

In regular crypto exchanges, you probably wouldn’t care much about the fees since they represent such a small amount of your transactions. However with BitMEX things can be quite different as the fees are calculated based on your contracts position (which can technically be 100x larger than your account balance). Therefore if you want to be profitable in the long term, being mindful of the different fees can be crucial. Below we cover the fees associated with Perpetual Swaps which has been the focus of this guide.

Deposit & Withdrawal: BitMEX doesn’t take any fees when it processes deposits and withdrawals. It also aims to use the minimum network fee based on blockchain load. Do keep in mind that withdrawals on BitMEX are only processed once per day around 13:00 UTC, which might seem inconvenient at first sight but has a lot of safety advantages both for the exchange the users as a result.

Taker Fee: The taker fee happens whenever you use a market order and is 0.075% of your total position. This will be triggered if you use a market order both when you buy and when you sell so it can add up, especially when trading at high leverage.

Maker Fee: The maker fee, or more accurately the maker rebate, happens when you use limit orders and instead of being charged you’re given 0.025% for providing liquidity to the market.

Funding Fee: This is a fee that is taken every 8 hours at 04:00 UTC, 12:00 UTC and 20:00 UTC. If there are more people shorting than going long, then those who short will pay this fee to those who’re going long and vica versa. The fee will rise the more the balance is skewed between shorts and longs but can be anywhere from 0.01% to 0.35%. You can see the upcoming funding rate at the bottom of the left sidebar when trading:

In this example above, the funding rate is 0.01% and since it’s a positive number it means those going long will pay the fee (if it was negative, it would be the shorters who’d pay).

Hidden Order Fee: Not that you should have any use for this, but having a hidden order (that doesn’t show on the order book) will be considered in the same fashion as a market order and will thus invoke a Taker fee of 0.075%.

Summary:

BitMEX Tips

-Try to minimize your fees by following the advice in the section above. As oppose to traditional exchanges, BitMEX fees can really add up, even when using our special sign-up link that reduces your fees by 10%.

-As a beginner start with small contract amounts and small leverage multipliers. It will take you time to figure out all the bells and whistles of the system and how it functions so you don’t want to make expensive mistakes at the very start.

-It’s not advised to use leverage above 25x unless you really know what you’re doing. This is true both because of the up and down nature of crypto markets but also because the liquidation price at such high leverage is not in your favor. BitMEX has something called a Maintenance Margin Requirement that protects their Insurance Fund at high leverage and you would be wasting your margin feeding this requirement that only protects BitMEX itself.

-Always set a stop-loss just before your liquidation price in order to avoid the hefty fees associated that BitMEX takes dealing with liquidations.

-In fact, it’s good practice that for every order you have an entry price (your limit order), an exit price (the limit price you will close at and take profits), and a stop-loss so that your downside is limited. Get into this habit and you will discipline yourself like a calculated investor instead of being a mere hopeful gambler.

-Keep an eye out on the funding rate at critical times in the market when shorts and longs are not in balance. When the funding rate is large, people who are paying the fee (when it’s positive it’s those who went long, and when it’s negative it’s people who are short) will be wary of paying the fee and thus look to close their position before the 8 hour interval. This can create large upward and downward swings just before and after these periods.

-While the BitMEX trading engine is top of the line, even it struggles at times dealing with all the activity, especially in really crazy periods. This can cause the system to be overloaded or for price action to be a few steps ahead of you trying to time your entries. You will need to be proactive in setting your limits, stops, and such so that the system can work for you instead of against you.

-Sometimes BitMEX announces a maintenance and this can be detrimental to you if you have positions open with no stop-loss set up. Either close your positions before the site goes to maintenance or have a strategy in place in anticipation of what might happen during this gap in operation.

-This should go without saying but never invest more than you can afford to lose. Be careful when using “cross” margin (at the very left of the margin slider) as this option uses all the money in your account to fund your position and you can have your whole balance wiped out if things go wrong and you don’t have a stop-loss in place.

BitMEX Strategies

So while a lot of people who’re trading on BitMEX will use their own Technical Analysis to come up with trading ideas, or perhaps follow signals posted on Twitter or private signals groups, there’s also a few different ways to make use of the platform.

Hedging Your Portfolio

While BitMEX’s massive money making potential might be the more attractive reason to short and use leverage, it actually makes most sense if you want to hedge and protect your crypto portfolio against price movements. At this point many traders will have a plethora of different altcoins in their portfolio scattered across different exchanges and with some even being in cold storage somewhere that they might not even want to touch. In such a case, it becomes nearly impossible to try to quickly sell all your positions if you anticipate a sudden downturn in the market.

This is where BitMEX can really come in handy because you only need to keep a certain amount of your crypto on there and thanks to the leverage options you can represent much more money than you have in your wallet. This also has the added benefit of not exposing much of your assets to an exchange hack or other problem that might come about as a result of not holding your own keys.

We know that during critical periods most altcoins will follow the price of Bitcoin so in order to protect your portfolio from going down, you can take a short position and profit from the price of Bitcoin going down. Ultimately you can set it up so that any downward price movement will not negatively impact your total portfolio holdings. This strategy can be particularly effective especially when BTC price is at a certain price support level and going below it and breaking the support is expected to lead to a huge downfall of BTC price and as a result of every other crypto asset as well.

Avoiding Tax Triggering Events

Even if you’re a BTC maximalist and have all your assets in BTC in one easy to sell location, there’s still a very important advantage that a platform like BitMEX allows. In many countries the selling of your BTC is a tax triggering event as it is considered capital gains. If you want to exit or hedge your BTC position, you can simply short BTC at 1x and that will act as the equivalent of selling to USD but it won’t trigger any capital gains tax.

Resistance and Support

There are nearly countless different techniques a technical analyst has at his disposal to make educated guesses on where the price might go next but arguably the most powerful is looking at where the support and resistance lines are at. At times BTC will be trading in range between the support and resistance (until it can decide which one will be broken first) and at these moments it can be profitable to go long at support and go short at resistance. Similarly, in bull markets it has historically been wise to long after a dump in price, or to short after a pump during bear markets. These are all quite basic and oversimplified tactics but hopefully it gives you some ideas on how to get started even without being a TA expert.

Reacting To News Events

Even if you don’t know any technical analysis or have no idea which direction BTC will go, there’s still a very good reason to have a BitMEX account with some funds in it. Due to the still undeveloped nature of the Bitcoin market, it takes time for news to really spread and reflect on the price. While in the traditional stock market it might be reflected in milliseconds due to highly optimized HFT bots, with Bitcoin you sometimes have as much as a few hours until a particular big news really affects the price. We’ve seen this in the past with news coming out of China, or more recently with ETF rejection/delay news. If you keep your ear to the ground and follow things actively on Twitter and Telegram groups, you can profit from this heftily. Make sure to use a tool like Tweetdeck so that tweets can immediately popup as notifications and alert you in real-time.

Useful Tools & Resources

Coinfarm – Lots of detailed stats and information regarding the open long and short positions on BitMEX. There’s also a chart that shows you the funding fee for the past week so you can anticipate whether you will be the one paying or earning the funding fee in those 8 hour windows.

Anti-Liquidation – A useful tool/calculator that aids you in placing your BitMEX orders in a way that meets different criteria you might have.

Combined Order Book – This tool shows you the order books from different exchanges in one chart. You can see the order sum required to move BTC in a certain direction.

BTCUSD Shorts – This simple chart on TradingView shows you the number of shorts currently open for BTC. A high number here indicates that a lot of people expect BTC to go down but this has also historically opened up the possibility of a short squeeze where price temporarily flicks up (sometimes in a matter of seconds while other times taking as long as a few weeks) in order to liquidate the short positions.

Signficant Trades – This little tool helps you see and hear in real-time big buy and sell transactions being made on various exchanges including BitMEX. Tune this to your liking and keep it running in the background and you’ll be alerted via sounds when big moves are happening.

Cryptopolis – This is a free private Discord community dedicated to discussing specifically BitMEX strategies and price action. Most of the action takes place in the #general-bitmex channel and while you shouldn’t use what’s discussed there as financial advice, it can be a good place to hangout if you’re trading on BitMEX heavily.

That wraps up our guide towards using BitMEX. If you found this useful, please remember to sign-up using our referral link. You will benefit from paying 10% less fees for six months at no extra cost to you and it will help us towards producing more content of this type.