Trading cryptocurrencies on the spot markets already provide considerable profits thanks to high fluctuations. Nevertheless, you can increase your earnings by using leverage. One of the platforms that makes this possible is Binance, more precisely BINANCE Margin trading, which we will focus on in this guide. As you continue reading, you will learn what margin trading is in the crypto world and why it is worth using Binance. What's more, we will explain it all by using a concrete example. So here we go!
What is margin trading in the crypto world?
Margin trading is simply trading with leverage, and it's popularly adopted in traditional finance, but it has also penetrated the cryptocurrency market. No wonder. It's because it allows you to multiply the profits of your positions in highly volatile markets.
But how? The thing is that Binance allows you to borrow additional funds so that you can use more capital when you open positions and thus maximize your profits. You also gain convenience. You can invest more without depositing additional funds, which will speed up your transactions. And as you know, the cryptocurrency market is highly dynamic, and every second counts here.
Unfortunately, this type of trading also involves higher risk. If the market does not move in the direction you assume, leveraged trading can result in losses as high as profits. In extreme circumstances, if you fail to margin, you may even find that your portfolio is completely wiped out.
Why you should use Binance Margin?
Using Binance Margin, despite its risks, also brings many benefits. If you have the right experience and analytical skills, you can use them toswing the balance to your side. Here they are:
- Various trading pairs: Binance Margin allows you to trade on multiple trading pairs. There are over 600 of them, some not available in the traditional offering.
- Different forms of hedging: You can use many other assets to hedge your positions. For example, when you open a leveraged position on BTC, you can use ETH or USDT as collateral, giving you more flexibility.
- Break period: A break period allows you to disable the ability to trade with leverage for a while. This way, you will not be able to open positions under the influence of emotion, thus negating the risk of loss. Binance promotes responsible trading in this way.
- Insurance fund: Binance offers a special insurance fund. Its task is to protect your balance if it falls below 0 or if you cannot pay your debts
How to use Binance Margin? - Example
Using Binance Margin is extremely simple. The whole thing comes down to following just a few steps. First, however, you must log into your account. If you don't have one yet, to register, click on this link and follow the instructions displayed. Once you have successfully created your account, follow the steps below to start trading on Binance Margin:
Firstly, you need to access the Binance Margin website. You can do this by hovering your cursor over "Trade" at the top of the screen and then clicking "Margin". Alternatively, you can also click on this link. It will take you straight to the appropriate place.
If this is your first time trading with Binance Margin, a risk message will appear in a risk message window. Read it and then click "I understand".
You will need to transfer funds to your Margin account. To do this, click on the "Transfer" button in the position opening window.
If you already have free funds in your Margin account, it is time to take out a loan. To do this, click on the "Borrow/Pay" option. Next, enter the amount you are willing to lend and the interest rate. If everything is right, click "Margin Buy BTC". Finally, you can check the borrowed cryptocurrencies in your account by clicking the "Balance/Margin" button.
Now, you are ready to trade with leverage. Just go to the main Binance Margin dashboard and open a position. If you don't know how to do this, Binance has prepared a particular tutorial that explains the whole process step by step. You can find it at this link.
Now it's time for the least pleasant moment, the loan repayment. To do this, click the "Repay" button and "Repay" again. Next, select the cryptocurrency and the amount and press "Sell".
When trading with leverage on Binance, you must ALWAYS keep a close eye on the margin level. You will have to add additional collateral or reduce your borrowed funds if it goes down. If it goes below 1.1, you will be liquidated in extreme cases. What does this mean? That Binance will close your positions at market price to settle the debt.
Of course, in this guide, we have not described all the possibilities of the Binance Margin. Nevertheless, if you would like to get deeper into the topic of leveraged trading, Binance has prepared an extensive article in its Academy. You should read it to understand what this type of trading is all about to reduce the risk of incurring a loss.
