Categories: Crypto Currencies

Margin Trading On Binance

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.

What’s margin trading?

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.

How margin trading works on Binance?

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:

  • Normal mode. The usual exchange trading is carried out.
  • Borrowing mode. The system will automatically borrow funds on your behalf to execute the order.
  • Repayment mode. The coin you receive after trading will be automatically used to pay off the debt of the same coin in the margin account.

Trade example

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.

Secrets of margin crypto trading

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:

  • Never bring the situation to a margin call. You should learn how to stop a series of unprofitable transactions in time. As a rule, professional traders complete trading operations with a loss of 27-31% of the available deposit.
  • Before using the margin trading opportunity, you need to understand in detail the nuances of the commission charged by the broker. Often payments for the use of borrowed funds are made on a daily basis.
  • You need to scrupulously and extremely responsibly look for virtual currencies to make money. The option with altcoins characterized by a significant level of volatility (apart from bitcoin, of course, this is litecoin , bitcoin cash, tether, ethereum with ripple) is not very suitable for margin crypto trading.
  • Also, the effectiveness of margin trading in coins is low, the price of which shows a scanty spread of fluctuations during trading.
  • You should take into account the source of collateral in margin trading and control their volume. These are assets that are present on the trading balance of a working trader.
Olivia Chloe

Recent Posts

What’s Cardano Coin (ADA)? Details About ADA Coin

Cardano is a blockchain platform created by Input Output Hong Kong and Ethereum co-founder Charles…

4 hours ago

What’s Binance Coin? How To Trade BNB?

What's Binance Coin? Binance Coin (BNB) is a digital currency supported by an exchange of…

1 day ago

What’s an NFT Coin? Detailed Information About NFT

Whats an NFT Coin? Okay, since this is an acronym, let's start by decrypting it.c…

3 days ago

Difference Between Ethereum And Ethereum Classic

If you look closely at the list of available cryptocurrencies, it is easy to see…

4 days ago

How to Mine Ethereum? Pros and Cons

Created in 2015 by the Canadian-Russian programmer Vitalik Buterin, the Ethereum cryptocurrency (ETH), also known…

5 days ago

Best Alt Coin To Mine

The year that began in 2021 was marked by a rather difficult situation in the…

1 week ago