Tips for Crypto Margin Trading

3 Tips for Crypto Margin Trading

Margin trading is an exciting and potentially profitable way to leverage crypto assets to trade and earn even larger profits. However, we do have to caution you that this isn’t for those who can’t afford to lose the money. Margin trading is about leveraging (borrowing) what you’ve got in order to trade with those leveraged funds. 

In this Every Bit Helps guide, we take a closer look at margin trading, provide 3 tips for crypto margin trading, plus explain the Binance Funday Friday rewards scheme. 

Binance Sign-up Bonus

What is Crypto Margin Trading?

Margin trading is borrowing against crypto funds you already have, then using this loan to trade crypto. The aim with margin trading is to make a profit and pay back the loan. 

Margin trading amplifies what you’ve already got so that traders can make larger profits. Depending on eligibility and what you are willing to risk, you could trade crypto margins on Binance from 5:1 up to 100:1 (although most don’t leverage as much as that). In crypto trading, this is often shown as 5x, 10x, 20x, and so on. With the larger number showing how much you are currently leveraging. 

Example:
You have $1,000 in a Binance account, but you want to make more money and buy that Lambo. Using margin trading you could use that $1,000 and leverage it, say on a 10:1 ratio. This means you now have $10,000 to trade with and you can now attempt to trade your way up amplifying your returns (or losses).

Crypto Margin Trading Tips

Margin trading is nothing new. It started in the world of investments, traditional financial institutions, and stockbrokers. Now, these concepts have moved over and become popular in the crypto space, with traders leveraging billions in funds to trade on margin, with many opening long and short positions. 

If you are eligible and actively trading using a Binance Margin account: Take part today, to earn a 20% reward every Friday! 

What are the Risks of Crypto Margin Trading?

Crypto margin trading is risky. Cryptocurrency prices are highly volatile, and they can suddenly fall below the liquidation price. If that happens, traders have to cover those losses, usually when the margin ratio gets too close, or when a margin call is made. Failing to put in extra funds can cause the position to be automatically liquidated, and then you need to pay back the original loan, plus fees.

Although margin trading can produce impressive profits, it can also cause heavy losses.

It should only be attempted by experienced traders that understand and know how to use proper risk management practices, and have the funds to cover any potential losses, including the total loan amount.

What is a Long or Short position? 

When a trader opens a long position, they are hoping that the price of an asset will increase in value. 

On the other hand, when a trader opens a short position they assume that the price of an asset will decrease in value. 

Once the price of an asset reaches either the long or short position, a trader has made a profit, depending on the size of the position and the difference between the opening and closing price. 

However, there’s always a risk the market moves the other way. If that happens, a trader gets what’s called a “margin call.” 

What is a Margin Call?

A margin call means that the price has moved too far in the other direction. This means they need to put in more funds into a margin account to keep the position open, in the hope the price will still move in a direction they want it to go.

If a trader doesn’t add additional funds, then their margin account is usually liquidated straight away to cover the losses. Traders may then need to negotiate with the lender, to either make a payment to cover the loan or work out a repayment plan. 

Now, let’s take a closer look at three useful tips when Crypto Margin Trading.

3 Tips for Crypto Margin Trading

If you want to get into margin trading, we recommend you start small. Only leverage a small amount, (say 100 BUSD) and have the funds available to clear the leveraged amount in the event of the market moving against you. Also, it’s important to make use of smart financial trading tools, such as stop-limit orders to reduce the potential risk. 

1: Watch Your Margin Level 

Your margin level is something you need to watch closely to avoid automatic liquidation. 

For example, if the amount you are in profit is 2x the total amount being leveraged (borrowed funds + interest) then your margin account is in a good position. This means you don’t need to worry about it being liquidated. Binance shows this as >2.  

Watch Your Margin Level when trading Margin

However, once it drops below 2x the total leveraged amount, then you run the risk of liquidation. Here’s how Binance explains it if the amount is 3x the value of assets being leveraged

  • “When your margin level > 2, you can trade and borrow, and transfer assets to the Spot Wallet;
  • When 1.5 < margin level ≤ 2, you can trade and borrow, but you can’t transfer funds out of your Margin Account;
  • When 1.3 < margin level ≤ 1.5, you can trade, but you can’t borrow, neither transfer funds out of your Margin Account;
  • When 1.1 < margin level ≤ 1.3, a margin call will be triggered and you will receive a notification through mail, SMS and website to inform you to add more collateral (transfer in more collateral assets) to avoid liquidation. After the first notification, you will receive the notification every 24 natural hours.
  • When margin level ≤ 1.1, the liquidation engine will be triggered and all your assets will be liquidated to pay back the interest and loan. The system will send you a notification through mail, SMS and website to inform you. When the margin level returns to 1.5, the system will stop the liquidation process.” 

Depending on the amount being leveraged, that ratio can go up or down. So, if you are leveraging 5x then the margin level decreases, to reduce risk to margin traders. Here are Binance’s margin trading rules for more information

2: Make Use Of Your Cooling Off Period

Anyone trading on a margin position can make full use of a cooling-off period. You can set a cooling-off period for 1 day, 3 days, and even a whole week.

Binance says this gives users the ability to “temporarily suspend all margin trading activity for a specified period.” 

Once you set a cooling-off period for however many days it can’t be lifted until the end. This is a useful feature, and a chance for traders to re-assess trading positions and what they want to do in the event of the market not moving the way they hoped. 

Make Use Of Your Cooling Off Period

3: Use An Isolated Margin Or Cross Margin 

When trading using a margin position, there are two main options: Isolated Margin or Cross Margin.  Either can be selected on the main Binance Margin account page.

With an Isolated Margin, only specific trading pairs can be included in the margin trade. If you want to trade a range of pairs at any one time, you could open several Isolated Margin accounts, with two trading pairs in each account. 

Trading Steps for Isolated & Cross Account

Each position, and therefore, trading pair, is separate. So, if you need to increase margin collateral funds, you will need to top this up manually. 

On the other hand, instead of isolated positions, you could open a Cross Margin trading account. This way, you can trade across multiple positions at the same time with the same source of leveraged funds. Risks are often higher, but so are the potential rewards. 

Just remember, never borrow more for margin trading than you can afford to lose. Your capital is at risk. 

Binance Funday Friday: Margin Trading Rewards

Every Friday, Binance is running a Funday Friday reward for Binance margin traders. Where users can earn 20% of margin trading fees every Friday!

That’s right, Thank God It’s Friday (TGIF), when you can earn back 20% of margin trading fees, depending on the volume you trade and the amount you are leveraging. 

Binance Margin Funday Friday

Who is Eligible for Binance Funday Friday?

Anyone can participate, provided you already have a Binance Margin account, have completed KYC verification (Know Your Customer), and daily active margin trading is above 1,000 BUSD, or more.

Unfortunately, Binance Funday Friday isn’t available in every country, and those from restricted countries and territories currently can’t participate, including the U.S. and UK. 

How do I Claim Binance Funday Friday Rewards?

Binance Funday Friday payments aren’t made automatically. Bonuses are only paid out once they are claimed, and they expire if a bonus isn’t claimed after 5 days. 

If you are eligible and actively trading using a Binance Margin account why not take part today and earn a 20% reward every Friday! 

How do I Claim Binance Funday Friday Rewards?

Binance Funday Friday Terms & Conditions

  • Binance Funday Friday was launched on 14 January 2022 and runs every Friday. Eligible margin traders can earn 20% of margin trading fees. 
  • Every Friday at UTC 00:00 + 8, Binance takes 20% from margin trading transaction fees. Out of this, 5% comes from the average amount borrowed, and 15% comes from the average trading volume. 
  • Rewards are paid out in BUSD. 
  • 15% of trading volume rewards comes from an average snapshot of trading volumes from 16:00 (UTC) the previous Thursday, until 16:00 (UTC) on the Thursday before every (Funday) Friday. 
  • In order to be eligible, the minimum amount you need to be trading is 1,000 BUSD every day. With an upper limit of 50,000 BUSD. 
  • With the 5% calculated on your average daily borrowing amount, this is calculated from 16:00 (UTC) the previous Thursday, until 16:00 (UTC) on the Thursday before every (Funday) Friday. 
  • In order to be eligible, the minimum amount you need to borrow daily is 100 BUSD. With an upper limit of 100,000 BUSD. 
  • The total 20% fee is calculated based on the above and the price of BUSD trading pairs of the eligible assets at 16:00 (UTC) on every Funday Friday. (until the promotion ends, although Binance hasn’t said if or when that will happen). 
  • Every sub-account borrowing amount and trading volume is included in that of the parent account. 

How to an Open Binance Margin Account?

Opening a margin account on the Binance platform allows for the trading of assets using crypto funds. Margin trading gives you access to larger amounts of crypto as capital for investments for a borrowing fee.

  1. Log in to your Binance Account

From the Binance Home Screen, go to “Wallet” and then click “Margin” this will then take you to the Margin screen

Log into Binance Margin
  1. Watch the Margin Trading Video Tutorial

It’s important to watch the Binance Margin Trading video and improve your understanding of margin trading to complete the test after. This way, you’ll be able to hit the ground running!

Start Binance Margin Quiz
  1. Answer the Binance Margin Quiz

Once you have watched the video you can go ahead and answer the Binance Margin Quiz.

Binance Margin Quiz

Binance Referral Code

Binance Referral Code

Use Binance Referral ID Code GPZ64I32 at Sign-up

Sign-up Bonus

$285 Bonus, Plus 20% Off Trading Fees (Lifetime Discount)

Referral Terms

Bonus Last Validated

September 2022

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