IMPORTANT TIPS FOR CRYPTO MARGIN TRADERS
26/03/2022
By Damilola Ogungbayi Olushola
Key points:
- What is Margin Trading
- Get reward for Margin Trading
(a) Binance Margin is now running the Funday Friday
Campaign, in which eligible users could share 20%
Margin trading fee every friday. - Three Important Advices for Crypto Margin Traders
(a) Keep an close eyes on your margin level
(b) Make good use of the cooling-off period
(c) Make plans for using Isolated or Cross Margin
account
WHAT IS MARGIN TRADING?
Margin trading is a method of trading assets using funds provided by a third party. When compared to regular trading accounts, margin accounts allow traders to access greater Sums of capital, allowing them to leverage their positions.
Essentially, Margin Trading amplifies trading results so that traders traders are able to realize larger profits on successful trades.
This ability to expand trading results makes margin trading especially popular in low-volatility markets, particularly the international Forex market. Still, margin trading is also used in stock, commodity and cryptocurrency markets.
3 Reasons Why You Should Try Margin Trading
1.Exotic pairs
Margin trading offers access to exotic trading pairs. This involves two cryptocurrencies paired together (e.g. BTC and ETH). Instead of buying or selling the currencies themselves, the trader is speculating on the relative performance of the two. With Binance, traders can trade pairs with leverage of up to 10X. Keep in mind that the more volatile an asset’s price is, the less liquidity the market will hold for it. This is because the asset is less reliable to bet on, causing fewer trades to be established in that market.
2.Multi-assets collateral
Unique to margin trading is the ability for users to invest multiple assets as collateral to borrow leverage. On Binance, this can be done in the cross margin mode. So instead of investing BTC only into a BTC-based margin trade, investors can use their BTC and ETH, or BUSD, USDT, and so on, to denominate their collateral. Investing multiple assets as collateral allows traders to operate with more flexibility when opening trades.
3.Arbitrage
Margin traders can take advantage of arbitrage opportunities when the funding rate on futures pairs is volatile. For instance, when the BTC/USDT perpetual funding rate is negative, users can use margin to short the trade with BTC/USDT while using a long futures BTC/USDT perpetual trade to make a profit with low risk. Thus, traders aren’t necessarily dependent on the price of underlying assets but are more concerned with the markets’ actions. Since the two trades are placed in opposing directions, it doesn’t matter how the market trends, minimizing the risk to the trader.
How to Open a Margin Trading Account on Binance?
[Step 1]
Click the dropdown menu labeled [Trade] located at the top panel of your screen; and click on [Margin].
[Step 2]
Before you begin trading, please note that you are required to complete a short quiz. All users must obtain a 100% passing rate before trading on margin.
[Step 3]
Then, you will be able to transfer funds into your new Margin Trading Wallet. For example, you can transfer BTC, ETH, and BNB from their Exchange Wallet to their Margin Wallet. These funds will act as collateral to any borrowed funds incorporated in a margin trade and determine how much you can borrow (3x, 5x, 10x etc.).
[Step 4]
Click [Borrow/Repay], enter the amount you wish to borrow, note the hourly interest rate, and click [Confirm Borrow]. The funds will be credited to your margin account (which can be checked under your balance/margin button). The balance dashboard comes with a margin level gauge that relates the risk level to the borrowed funds, collateral you hold, and the market value. Margin level can be calculated as such: Margin Level = Total Asset Value / (Total Borrowed + Total Accrued Interest)
[Step 5]
If your margin level decreases, you either need to increase your collateral or reduce your loan. A margin level of 1.1 will automatically be liquidated, or in other words, Binance will sell the positions at market price to repay the loan.
GET REWARD FROM MARGIN TRADING [Funday Friday]
Binance is now running the Funday Friday Campaign, in which eligible users could share 20% Margin trading every Friday.
The Binance Funday Friday is a new and ongoing primo feature on the Binance Exchange that allows all Binance Margin traders who are eligible to enjoy and claim a share of the 20% trading income of Binance Margin. The Reward amount is based on the user’s average daily margin trading and borrowing volume as a proportion of all eligible user’s average daily margin trading and borrowing volume.
This is Another one of the many initiatives that Binance is continuously employing to give back to it’s traders to show appreciation for the trading activities of Binancians.
To be eligible to participate, first you would need to create a verified Binance Margin account
To be eligible to claim rewards, ensure that your daily average Margin trading volume is 1000 BUSD or more or your average daily borrow amount should be no less than 100 BUSD. Note that Users from the restricted countries are currently not supported
The promo started from Friday Jan 14, 2022 09:00 (UTC) and will continue until further notice.
THREE IMPORTANT ADVICE FOR CRYPTO MARGIN TRADERS
1.Keep a close eyes on your margin level:
Margin Level allows you to know how much of your funds are available for new trades.
As a crypto margin trader, Have some back up funding for crypto margin trading. When a user unfortunately gets it wrong and requires a margin call, a greater buffer of back up funding will be able to let the investor ride out the undesired outcome instead of being forced to liquidate due to lack of collateral. The way to protect against that is to have back up funding. Crypto margin traders should always be alert for when the margin level gets low Inorder to avoid a margin call. A Margin call occurs if your account falls below the maintenance margin account.
2.Make good use of the cooling-off period:
Binance has launched the cooling off period for margin trading. The cooling-off period allows user to temporarily suspend all margin trading activity for a specified period. Users can set a cooling-off period, margin accounts cannot be used to borrow any cryptocurrencies.
When to use the cooling-off period?
- You can use the feature to limit and control your trading activities, especially in situations when you feel pressured by losses;
- It enables traders to abstain from behavior and activities that can lead to irresponsible trades.
How to enable the Cooling-off Period for margin borrowing on Binance
I. Login to your Binance account. Click [Wallet] - [Margin]. Next, click [More Data] - [Borrowing Cooling-off Period].
Alternatively, you may click [Trade] - [Margin] to enter the Margin Trading page. Click the [⋮] icon on the order entry panel and select [Borrowing Cooling-off Period].
II. Select your preferred duration and click [Confirm]. You can choose “Today(1 day)”, “3 Days” or “1 Week”.
III. Please note, the borrowing function cannot be turned on during the Cooling-off Period. Click [Confirm] to disable your margin borrowing.
3.Make plans for using Isolated or Cross Margin account:
As a crypto Margin trader always make plans for using Isolated or Cross Margin account.
Isolated Margin mode allows traders to restrict the amount of margin allocated to each position and only the balance used as margin gets liquidated.
Cross Margin gives traders far less control of the available balance, but it automatically margin adjust function can prevent liquidation.
CONCLUSION
Margin trading can expose traders to opportunities unavailable in other forms of trade. When margin trading with purpose and attention, it can become a fun and profitable endeavor. As noted earlier, trading in margin should be done by those with experience in trading. In addition, traders must understand the risks involved in margin trading. Useful tools like stop-orders should be used whenever possible. At any rate, the options discussed above with trading margin are possible through Binance. If you’re truly serious about making your first margin trade.
Click the link below to get started on Margin Trading
https://www.binance.com/en/trade-margin/BTC_USDT?ref=331234001
To learn more and get started on Binance Funday Friday click the link below
https://www.binance.com/en/margin/margin-happy-friday?ref=331234001
