Are you looking for a way to take advantage of market volatility and increase your potential returns? If so, you might be interested in Kraken margin trading. Kraken margin trading is a feature that allows you to trade crypto with leverage, meaning you can use borrowed funds to increase your exposure to the market.
Margin trading can amplify your profits but also your losses, so it is important to understand the risks and requirements before you start.
In this article, we will explain what Kraken margin trading is, how it works, and what you need to know if you are eligible to use it. Let’s dive in!
What is Kraken Margin Trading?
Kraken margin trading is a feature that allows you to trade crypto with leverage, meaning you can use borrowed funds to increase your exposure to the market. Kraken also offers over 100 margin-enabled markets for you to buy (go “long”) or sell (go “short”) a growing number of cryptocurrencies with up to 5x leverage. You can trade popular coins like Bitcoin, Ethereum, and Litecoin, as well as emerging tokens like Flow, Aave, and Chainlink.
For example, if you have $10,000 USD in your account. With Kraken’s margin extension, you could go long or short on $20,000 USD worth of ETH/USD on the ETH/USD order book with this account. This means you are using 2x leverage, or borrowing $10,000 USD from Kraken, to double your exposure to the market.
Kraken Margin Trading Requirements
If you are a US resident, you need to meet some extra eligibility criteria than non-US users to qualify for margin trading. Kraken does not offer margin trading to clients with Starter or Express accounts.
Due to regulatory guidance, Kraken has stopped offering margin trading to some of its U.S. clients from June 23, 2021, onwards. Only U.S. clients who meet certain requirements can still use margin trading services. For U.S. citizens who don’t meet these requirements, they can only close or settle their existing margin positions after June 23rd, 2021, but they can’t open new ones.
To be able to margin trade on Kraken as a US-based user, you need to declare yourself an Eligible Contract Participant (ECP) according to U.S. law. You also need to have an Intermediate or Pro account on Kraken. If you don’t have one, you need to verify your account to at least the Intermediate level before you can declare yourself as an ECP.
There are two main ways to qualify as an ECP under this definition:
- For individual clients, you need to have more than $10 million in assets that you invest yourself.
- For institutional clients, the institution you work for must have more than $10 million in total assets. This means the total value of the assets, not the net value.
Kraken Margin Trading Fees
The margin fees are based on the total amount of money that you borrow to make the margin trade. Kraken charges two types of fees for margin trading:
- Opening fee: This is a one-time fee charged when you open a position. It is based on the size of the position and the leverage level. The opening fee ranges from 0.01% to 0.02%, depending on the currency pair.
- Rollover fee: This is a recurring fee charged every four hours as long as you keep your position open. It is also based on the size of the position and the leverage level. The rollover fee ranges from 0.01% to 0.02%, depending on the currency pair.
Here are the current fee rates for major currency pairs on the Kraken exchange:
|Currency||Symbol||Opening fee||Rollover fee|
|Aave||AAVE||0.02%||0.02% per 4 hours|
|Algorand||ALGO||0.02%||0.02% per 4 hours|
|ApeCoin||APE||0.02%||0.02% per 4 hours|
|Axie infinity||AXS||0.02%||0.02% per 4 hours|
|Bitcoin||BTC||0.01%||0.01% per 4 hours|
|Bitcoin Cash||BCH||0.02%||0.02% per 4 hours|
|British Pound||GBP||0.015%||0.015% per 4 hours|
|Cardano||ADA||0.02%||0.02% per 4 hours|
|Chainlink||Link||0.02%||0.02% per 4 hours|
|DAI||DAI||0.02%||0.02% per 4 hours|
|Dash||DASH||0.02%||0.02% per 4 hours|
|Decentraland||MANA||0.02%||0.02% per 4 hours|
|Dogecoin||DOGE||0.02%||0.02% per 4 hours|
|Ethereum||ETH||0.02%||0.02% per 4 hours|
|Ethereum Classic||ETC||0.02%||0.02% per 4 hours|
|Euro||EUR||0.015%||0.015% per 4 hours|
|Litecoin||LTC||0.02%||0.02% per 4 hours|
|OmiseGO||OMG||0.02%||0.02% per 4 hours|
|Polygon||MATIC||0.02%||0.02% per 4 hours|
|Ripple||XRP||0.02%||0.02% per 4 hours|
|Solana||SOL||0.02%||0.02% per 4 hours|
|The Sandbox||SAND||0.02%||0.02% per 4 hours|
|Tether||USDT||0.02%||0.02% per 4 hours|
|Tron||TRX||0.02%||0.02% per 4 hours|
|Uniswap||UNI||0.02%||0.02% per 4 hours|
|USD Coin||USDC||0.02%||0.02% per 4 hours|
|US Dollar||USD||0.015%||0.015% per 4 hours|
|Zcash||ZEC||0.02%||0.02% per 4 hours|
Check out the extended version of the current fee rates here.
How to Margin Trade on Kraken
To trade on margin, you need to choose how much leverage you want to use on the Advanced order form on the Kraken website or on the Kraken Pro app or Kraken Terminal. You need to go through numerous order types based on where you believe the market will move. As a user you can open long or short positions and close them by setting opposite orders.
How to Open a Margin Position on Kraken
Opening a position means getting advanced funds (the margin) to trade with leverage. There are two types of positions: long or short.
Long: Kraken gives you EUR to buy ETH.
Short: Kraken gives you ETH to sell for EUR.
To open a margin position on Kraken, follow these steps:
1. Log in to your account and go to the New Order tab.
2. Select “Intermediate” to enable margin trading.
3. Choose the currency pair and market you want to trade on.
4. Choose the type of order you want to place: market or limit.
5. Enter the amount of base currency you want to buy or sell.
6. Enter the leverage level you want to use: 2x, 3x, 4x, or 5x.
7. Review your order details and confirm your order.
How to Close a Position
To close a position, you need to return the advanced funds to Kraken. You need to create an opposite order to the one you opened.
For example, if you have an open long position for Bitcoin, you need to do the following:
1. Go to the Positions tab and find your open position.
2. Select Sell because your open position is Buy.
3. Choose any leverage level because it doesn’t matter for closing a position.
4. Click on Sell ETH for EUR, for example, and your position will be closed.
5. Your balance will be updated with your profit or loss from the position.
Is Kraken good for Margin Trading?
Kraken is one of the leading platforms for margin trading in the crypto space.
- You may trade with up to 5x leverage on Kraken’s more than 100 markets that support margin.
- Kraken has competitive and transparent fees for margin trading. Based on the currency pair, the fees range from 0.01% to 0.02%.
- Kraken has a user-friendly and secure platform for margin trading. You can also use the trading bot to automate your strategy.
- Kraken has a high level of liquidity and reliability for margin trading. It has a deep order book and low slippage in most markets.
Can I Margin Trade on Kraken in the US?
Kraken margin trading is not available to all U.S. clients, as there are some legal and regulatory restrictions that apply. You must have an Intermediate or Pro account and self-certify as an Eligible Contract Participant (ECP) in order to use Kraken’s margin trading platform.
What Margin Level does Kraken Liquidate?
Kraken liquidates when the margin level is between ~40-80%.