Two years ago, it was impossible to find a crypto exchange to trade on margin. Although in the stock and commodity markets, the provision of credit funds has long been a common practice. Margin trading increases the liquidity and trading volume of an asset, using leverage, a trader can increase his capital faster.
In this article, we are going to show you how Binance Margin Trading works. This platform is constantly growing and increasing the set of trading instruments. At the beginning of summer 2020, traders were able to work with leverage on the updated version of the service.
Margin trading is a method of trading assets using funds provided by a third party. Compared to regular trading accounts, margin accounts allow traders to access large amounts of capital, allowing them to leverage their positions.
Margin trading is used in the stock, commodity and cryptocurrency markets.
In traditional markets, borrowed funds are usually provided by an investment broker. However, in cryptocurrency trading, funds are often provided by other traders who earn interest based on market demand for margin funds. Although less common, some cryptocurrency exchanges also provide margin funds to their users.
There are many exchanges on the market that provide a margin trading service. One of them is Binance (up to 3x leverage). You can use leverage in trading on it after verifying your account.
If you want to use your borrowed funds for trading, you can go to the Exchange page, select the Margin tab and trade normally using Limit, Market, Stop-Limit and OCO orders.
There are three modes for margin trading on the Binance platform:
We believe that the BNB price will rise, so we want to open a long position with leverage on the BNB. To do this, we first transfer funds to our Margin Wallet and then borrow BTC. We then use the borrowed BTC to buy BNB. If the price of BNB rises as we expected, we can sell our assets and repay the borrowed BTC along with the corresponding interest. Any remainder of this trade will represent her profit.
However, margin trading can increase both profits and losses. Therefore, if the market moves against our position, our losses will be greater.
If your level of risk gets too high, chances are that your assets will be liquidated. Therefore, make sure you understand how Margin Trading works before using it.
Competent traders have formulated a chain of simple principles, the adherence to which gives a real opportunity to consistently receive large profits when margin trading virtual currency. It is recommended to pay special attention to the following professional tips:
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