Binance Margin Guide: What is Binance Margin? What should be kept in mind when trading? If you’re used to investing in cryptocurrencies on other platforms, switching to Binance will feel like a lot of unknown trading features. The Margin feature on Binance is a great example. In this article, we will learn about this feature.
What Is binance Margin Trading?
Margin trading on Binance, also known as margin trading.
In simple terms, margin trading is when you use your Binance loan to open a trade many times higher than your capital.
- You have 10,000USDT in your Binance account. The price of BTC is now 10,000 USD/BTC. Open a regular Buy BTC order. You can only buy 1BTC. Subsequently, the price of BTC increased to 11,000 USD/BTC. Sell 1 BTC you bought earlier and get 11,000 USDDT, a profit of 1,000 USD compared to the beginning.
- In another transaction, you have 10,000 USDT in your Margin wallet. The price of BTC is also at 10,000 USD/BTC. Open an order to buy 3BTC margin. At this point, you used your 1,000 USDDT and the 2,000 USDDT borrowed from Binance. Subsequently, the price of BTC increased to 11,000 USD/BTC. Sell the 3 BTC you bought, earning 33,000 USD. You pay 20,000 USD borrowed (assuming the interest is 0), receive 13,000 USDDT in your account, earn 3,000 USDDT with only 10,000 USD initially.
Notes to know to avoid losing money when playing Margin Binance
1. Benefits of Margin Trading
Binance margin trading makes you a big profit: playing Binance Margin can make you a bigger profit than opening a similar trade when trading regular coins. This is the most important advantage that attracts people when investing in coins and cryptocurrencies.
Binance margin trading allows you to diversify your investment portfolio. Since you can use borrowed capital with the same initial capital, you can open multiple positions.
Binance margin trading allows you to easily enter trades without large capital.
2. Disadvantages of margin trading feature.
The margin is easy to lose: the margin is like a double-edged sword. The more chances you have, the greater the loss. If you make the wrong trading decisions, you will face bigger losses.
Trading on margin carries a high degree of risk. The more you lose, the more likely you are to face the risk of inadvertent liquidation of the trade.
3. Use BNB as a transaction fee to get 25% off transaction fee
As learned in the previous articles, if you use BNB to pay transaction fees, you will receive a 25% commission reduction. Therefore, to avoid losing a lot of margin trading fees, you can enable the payment of transaction fees with BNB.
Note, you must have enough balance in your BNB wallet to use as a transaction fee. If there is not enough BNB balance in your account, you will be charged as usual.
4. Distinguish cross and isolated margin
The Cross and Isolated Margin feature allows players to choose how to use their capital to avoid liquidating their trading positions.
- What is cross margin? Cross margin is your use of your entire account balance to avoid being liquidated when your position is trending relative to the market. When a forced position is liquidated, you may lose your account completely. However, if your account is larger than the market decline, your position can be left in its place until you want to profit from your position.
- What is the insulated margin? The isolated margin only allows you to use the margin balance to prevent the position from being liquidated. When the market goes against your position, your position is forced to close if the loss is greater than the margin balance.
When your position goes against the market trend, you won’t say when the market will get back on track with your trade. Therefore, using the entire balance to maintain the liquid position is risky and can lead to losses.
When investing, you should only use a certain amount of capital to be ready to lose for a trade. If you made the wrong decision in one position, accept the loss on that trade and look for another opportunity. This is exactly how Isolated Margin works. And Investiki.com recommend using this feature to ensure the safety of your investment.
Conclusion: Binance Margin
Play Margin on Binance helps you to have higher profits, diversify your portfolio and open more positions with the same capital as conventional trading. You may be used to being on the big main offer to get more money in the margin of the transaction.
Native margin trading can also make you lose more. You will have to risk losing more than your initial investment. Do it; here there is also a high transaction feature.