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Explanation of spot transactions on margin
Last updated: March 31, 2025
What are spot transactions on margin?
Spot transactions on margin let you buy or sell cryptocurrencies on the Kraken exchange with funds that may exceed what you currently hold in your account. For example, if you deposit $5,000, you could use margin from Kraken to place an order worth $10,000 on the BTC/USD order book.
How does it work?
When you use margin, you incur certain obligations:
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You must pay any applicable fees.
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You must keep enough collateral in your account to meet minimum maintenance margin requirements.
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You must repay the margin extension, either by settling the position directly or through one or more closing transactions.
After taking out a margin extension, you’re said to have an “open position.” For instance, if you use margin to buy BTC, that’s called “opening a long BTC position.” If you use margin to sell BTC, that’s “opening a short BTC position.”
Risks
Margin transactions involve a high degree of financial risk and are not suitable for everybody. Among other things, using margin to support spot purchases and sales of cryptocurrencies can amplify your gains as well as your losses, and can even rapidly wipe out your account if you aren't careful or the market moves against you.
Risk management
Sensible risk management should be employed when trading using margin extensions. For example, you should consider setting both a stop to limit loss and a profit target for every open position.
Before using margin extensions to trade cryptocurrencies, please take time to fully understand it and the unique risks involved. There are a lot of concepts to learn, but this is your money at stake, so it's worth your time to walk through everything carefully.