Binance Margin trading needs knowledge and experience regarding how the market works. Binance makes margin trading straightforward by providing some of the most acceptable alternatives and learning material for crypto investors.
Margin trading combines elements of the Futures and Spot marketplaces to let traders trade cryptocurrencies with leverage. Just like spot trading, margin contains the quick swap of a virtual asset.
The main distinction is the capability to add leverage to these trades, increasing the value of the trade varying from double to tenfold, as is achievable with futures contracts.
Margin trading
Binance Margin trading has some characteristics further than these two simple concepts. For example, investors should assign collateral to use leveraged funds and choose the required leverage they want to utilize in their positions.
Investors should be watchful of market variations when margin trading, as margin calls can frequently occur, particularly with cryptocurrencies. A margin call occurs when a trade goes adversely, potentially charging the huge trade losses based on their leverage ratio.
In such instances, the leading platforms will conduct a margin call wherein an investor has two choices: add more collateral or decrease the position size. To stop being liquidated, an investor can decrease the academic exposure of the position, consequently lessening the position’s leverage. Then again, the investor can also assign more margin towards the trade to prove that they have adequate money to keep handling the trade.
Margin trading is utilized in multiple cases; however, one of the crucial use cases is to circumvent against other assets or a portfolio.
Hedging contains opening new positions that are adversely associated with current positions. Traders and Investors hedge their portfolios as insurance methods to alleviate potential losses.
Since Binance Margin trading can aid you in earning huge revenues, it should never be ready without applying risk management tactics like using stop-limit orders. Or else, small marketplaces shifts can be very expensive to an investor. Just like you can get success with higher leverage, you may also gain a failure of the same level.
Why is Binance Margin good for you?
1. Diverse trading pairs
Binance Margin supports more than 600 trading pairs, comprising some pairs that are not frequently provided.
2. Multi-asset collateral
Margin users can invest more than one asset as collateral for borrowing and trading on leverage. On Binance, you can do it in the cross-margin mode.
Rather than investing Bitcoin just into a BTC-based Binance Margin trade, traders can utilize their ETH and BTC, or USDT, BUSD, etc., to denominate their collateral, enabling investors to run with more suppleness when opening trades.
3. Cooling-off period
To help users avoid surplus trading, users can provisionally suspend margin-trading-related actions for a particular time frame by triggering the feature of the Cooling-off Period. These are a crucial part of the Binance’s efforts to support accountable trading and stop obsessive trading behaviour.
4. Insurance fund
An insurance fund in Binance margin safeguards traders’ accounts when their equity is less than zero or when the trader is incapable of repaying debts because of a lack of money in the account.
5. Exotic Pairs
Margin trading provides access to exotic trading pairs. That entails two cryptocurrencies coupled together (for example, ETH and BTC). Rather than selling or buying these virtual assets, investors can consider the comparative performance of the two.
With the cryptocurrency exchange like Binance, you can trade pairs with leverage equal to tenfolds. Consider that the more impulsive a token is, the marketplace will hold less liquidity for it. That is, the asset is less dependable to wager on, causing fewer trades to be set up in that marketplace.
6. Arbitrage
Margin traders can enjoy arbitrage opportunities when the monitory rate on futures pairs is volatile.
For example, when the USDT/BTC perpetual funding price is negative, you can use margin to reduce the trade with USDT/BTC while coming into a long futures USDT/BTC perpetual trade for making revenue with lower risk. Therefore, investors are not dependent on the cost of primary assets but are more worried about the marketplace’s actions.
Because the two trades are situated in the reverse direction, it doesn’t matter the way the marketplace trends, reducing the hazards to the investor.
How does Binance Margin work?
If you can freely explore cryptocurrency leverage trading, you can begin margin trading on the Binance platform by following simple steps.
Step 1: Transfer
Go to your account balance information, and click on the option ‘Margin’. Read the margin account agreement carefully and check, ‘I understand’. After that, you can quickly transfer money into your Margin Trading Wallet.
Step 2: Borrow
Click on the option ‘Repay/Borrow’, type the desired amount you want to borrow, check the hourly rate of interest, and then click on the option ‘Confirm Borrow’. The money will be deposited into your margin account, and you can quickly check this through your Binance Margin/Balance button.
Step 3: Trade
For using your borrowed money for trading, visit the exchange section, choose the ‘Margin’ tab, and then you can begin trading.
Step 4: Repay
To repay your debt, you can click on the ‘Repay/Borrow’ button and choose the ‘Repay’ tab. Choose the amount and coin you wish to repay, then click on the ‘Confirm repayment’.
If you have begun margin trading, keep closely checking your margin level. If the Binance Margin level reduces, you will either require decreasing your loan or boosting your collateral.
Whenever the margin level gets to 1.1, the loan will be liquidated by itself, implying that Binance will sell position(s) at the market rate for repaying the loan.
Conclusion
There are plenty of advantages of margin trading that you cannot get from spot trading if you understand how to use the tool properly. With purpose, caution, and experience, margin trading can be a beneficial tactic to reach your economic goals. Though, it’s crucial always to know the risks involved in leveraged trading and margin trading. For practiced traders, Binance margin provides a large variety of functions and options that can aid in making your margin trading expedition more fun and responsible.
