Margin trading combines futures and spot trading because it allows investors to trade cryptocurrencies through leverage. Just like with spot trading, Binance Margin trading also causes a quick cryptocurrency ownership exchange.
Still, margin trading varies from other types of trading in that it utilizes leverage in trades that increases the trade worth in the series of double to ten times.
Margin trading utilizes leveraged funds, in which traders invest margin or collateral to choose their preferred leverage to trade ((2x, 20x, etc.). Binance Margin trading consists of trading assets through third-party money, and margin accounts provide traders with higher capital, allowing position leveraging.
Also, margin trading increases trading results, and investors can enjoy higher revenue levels in winning trades. This amplification of trading results makes margin trading tempting in low-volatility marketplaces.
In cryptocurrency trading (or in the Cryptoverse), margin trading is presented by traders reaping awareness according to the market demands of Margin funds.
Some CEXs or cryptocurrency exchanges also tend to provide Margin funds. Traders use leverage trading in the marketplace of cryptocurrency to increase profits. Binance Margin Trading is a popular form of leverage trading in the world of Cryptoverse. It entails providing assets as collateral for gaining buying power.
Margin trading allows you access to premium trading pairs (like ETH and BTC). With it, investors can place trades that spin around the recital of the two trading pairs.
Besides, margin trading enables numerous assets as security for leverage trading. If there is instability in the funding prices, margin trading provides paths to arbitrage in the futures marketplaces.
In the crypto marketplaces, especially on Binance Margin Trading, the money originates from other investors on the platform. These investors add their liquidity to the Binance-Margin Trading exchange and get interested from investors that borrow their cryptos when margin trading.
Since trading with margin is challenging, beginner traders should avoid Binance Margin Trading. More experienced traders should utilize it with some experience trading in the marketplaces of the crypto spot.
Investors can use borrowed money
Investors can use borrowed money to go short or long in the marketplace, implying that they can trade in any way based on the existing market situation. For instance, investors can borrow money from the exchange and sell their assets if they think the market is low.
Then, when the crypto rates go down, the investors can re-purchase the cryptos at a reduced price and save the difference as profit. Margin trading aims to exploit the investor’s revenue by entering the marketplace with larger position sizes. But, it can also aid expand an investor’s portfolio as they can open numerous position sizes on the Binance with relatively smaller portions of capital.
That enables them to expand and hedge their portfolio and decrease the possibility of huge losses.
Trading on Binance with margin is challenging because the increased trading outcomes work as a two-edged blade. Just like Binance Margin trading have the power to boost your revenue, it can also boost your losses if you fail to practice risk management and discipline.
But, Binance Margin Trading takes place in the conventional spot markets with equal to 5 times leverage. However, futures trading on this platform happens in the futures marketplaces and doesn’t involve owning the underlying cryptocurrencies.
Why is Binance Margin good for you?
It is better to trade on Binance Margin than most other platforms because of their exceptional features to safeguard traders.
Additionally, Binance Margin can provide a superior quality of service with quicker trading transaction speeds and higher uptimes. Here are some of the appealing features of Margin trading on Binance.
1. Insurance fund
A common problem that several margin trading exchanges face is what action to take when the margin equity of the trader falls below zero and can’t repay the borrowed money.
Usually, this can cause many problems for the platforms if several investors simultaneously fall into negative equity. To overcome this, Binance has an insurance fund feature to secure users when their equity falls below zero or they cannot repay their debts on Crypto Loans while performing margin trading.
2. Cooling-off period
One of the investors’ main problems while trading is the support to “over-trade.” Binance’s ecosystem for margin trading has taken some measures to prevent investors from surplus trading.
By using the feature of the Cooling-off period, investors can postpone all Binance Margin trading for a specific time. It’s made to prevent compulsive trading and persuade responsible trading when an investor is not thinking evidently.
3. Multi-asset collateral
The Binance platform has enabled investors to handle all their trading collateral and positions. For instance, their Cross-Margin trading mode allows users to add numerous assets as collateral to trade on Binance by borrowing.
For instance, traders can utilize USDT, BUSD, ETH, and BTC for collateral in BTC-based margin trades. You can also refer to another example; you can use your BUSD in your account to sustain the margin level for a weakening USDT/AXS position. Again, the cryptocurrency doesn’t need to be associated with Cross-Margin trading.
That enables investors to run with more suppleness when opening trades and gives more ways for them to be capable of handling their risk.
4. Diverse trading pairs
Margin trading rivets place trades inside the spot marketplace using borrowed money. That implies that Binance Margin Trading supports more than 600 trading pairs you can usually trade on their spot platform, giving a large variety of assets that traders can spend in other exchanges.
5. Responsible trading
The responsible trading policy of Binance allows you sensibly have adequate control of your trade and transactions. Binance preaches to its customers to protect capital, regularly educate, and practice self-discipline.
Binance Margin trading can reveal investors to opportunities engaged in other trade forms. When margin trading with attention and purpose, it can become a lucrative and fun endeavor.
As mentioned earlier, margin trading should be conducted by people with enough experience in trading. Additionally, investors should realize the involved risks in margin trading. Some helpful tools such as stop-orders must be utilized whenever possible.