cryptocurrency margin trading
In June 2019, the Binance cryptocurrency exchange introduced a new version of its platform with support for margin trading – Binance 2.0.
Margin trading is a form of trading in which traders can borrow funds from the exchange to increase the size of their position, which allows you to increase potential profit (but at the same time increases potential loss).
Margin trading is especially popular in markets with low volatility (for example, in the foreign exchange market). Due to the high volatility of the cryptocurrency market, this type of trading is associated with great risks, therefore margin trading is not recommended for absolute beginners in crypto trading .
To open a margin account, go to the Binance exchange (official site https://www.binance.com/ ) and hover over your profile. In the drop-down menu, click on your email to go to the control panel.
In the "Balance Information" section, click on the "Margin" subsection, and then confirm the agreement on opening a margin account.
After activating the margin account, you can transfer funds from your exchange wallet to the wallet for margin trading. To do this, click on the "Wallet" tab, select "Margin" and click on the "Transfer" button opposite the asset at the bottom of the page. Enter the amount you want to transfer from the exchange wallet to the margin one and confirm the transfer.
You can use these funds to secure your margin position. Your balance determines the amount of funds that you can borrow in relation to a fixed leverage (3 to 1, 3x). For example, if you have 1 bitcoin, you can borrow 2 more BTC. After choosing the coin and the amount you want to lend, confirm the loan.
Then, the amount that you lent will be credited to your margin account. After that, you can trade borrowed funds. You can check the current status of the margin account by going to the "Balance" page and selecting the "Margin" tab.
On the right side of the screen you will see a mark-up level that reflects the degree of your risk depending on the borrowed funds and the amount on your balance sheet that acts as collateral.
The level of risk varies depending on market movements and if the price does not match the forecast, your assets may be liquidated. If the price matches the forecast, you can sell your assets and pay off your debt along with the interest rate. The balance after this transaction will be profit.
If your mark-up level drops to 1.3, you will receive a margin call, which is a reminder that you should increase the deposit (deposit additional funds) or decrease it (pay off the amount you borrowed).
If your mark-up level drops to 1.1, your position will be liquidated – the exchange will sell your assets at the market price in order to pay off the debt.
To use borrowed funds in trading, select the Margin tab in the Exchange section. You will be offered market, limit and stop-limit orders.
If you want to transfer your funds back from the margin to a regular Binance wallet, click “Transfer” and use the button between wallets to change the direction of the transfer.
Publication date 10/19/2019
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