Are you a crypto leverage trader having difficulties with margin trading or are you looking for a lower risk leverage trading solution to amplify your gains with a small investment portfolio?
This research work inspired by Binance - the most popular margin trading platform is just for you!
In this article, I will give away three (3) important tips that will guide and put you on track to make great gains while leverage trading.
I know you are already itching to learn these tips, but for the benefit of the newbies in the crypto space reading this article and wondering what is margin trading and how they can start opening margin trades; let me quickly explain the meaning and concept of margin trading.
What is Margin Trading and What Concept Does it Operate On?
Margin trading is a crypto trading option that allows you trade assets using borrowed funds provided by a third party requiring a trader to tender collateral in form of a crypto asset and pay accrued interest on the borrowed funds. Margin Trading allows traders with small investment capital to access extra funds, allowing them to leverage their positions. Binance Exchange serves as the third party for those who trade margin on its platform.
Margin Trading is based on the concept of leverage trading; when you trade Margin, you are opting to trade with the hope of using a small investment capital to amplify your trading wins to make huge profits or risk losing all your trading capital if your trading decisions leads you to make significant losses.
Obviously this trading method requires careful study of the market sentiments and the use of effective risk management tools in order to maximize larger profits on profitable trades and minimize losses.
To illustrate a margin Trade; consider this example:
If you have $200 worth of USDT, you can trade a position worth $600 USDT using a 3x. This means that the third party (Binance) will borrow you the balance $400 worth of USDT to complete the trade and you will be required to pay a small token hourly interest. You will also be allowed to take all the profits or the loss generated from the borrowed funds used to complete the trade. Binance Margin Trading allows lower risk leverage of 3x for cross margin or up to 10x for Isolated margin.
Before I give away the 3 tips for crypto margin traders, let’s digress to discuss how you can benefit from an on-going incentive to trade margin that over 20 Million crypto traders like me who prefer trading leverage on Binance are currently enjoying.
Binance is currently rewarding its crypto margin traders with a juicy promo- Binance Margin Funday Friday promo.
The Binance Margin Funday Friday is a new and ongoing promo 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 distributed is based on each user's daily average margin trading and borrowing volume; so to be eligible to claim rewards, your daily average Margin trading volume should be 1000 BUSD or more or your average daily borrow amount should not be less than 100 BUSD.
This promo started from Friday Jan 14, 2022 09:00 (UTC) and will continue until further notice. Note that users from the restricted countries are currently not supported. Click here for details on rules guarding the promo.
This is another one of the many initiatives that Binance is continuously employing to give back to its traders to show appreciation for the trading activities of Binancians and a welcome incentive for you to become a crypto margin trader. To get full gist of how to participate, read about it here or simply visit the Funday Friday Landing Page
Having explained what Margin Trading involves, and how to take advantage of the ongoing Binance Funday Friday Margin Trading Promo that allows you earn while you trade, let’s now dive-into main topic.
What are the 3 most important tips to guide crypto margin traders looking for gains to trade safely and responsibly.
3 Important Tips for Crypto Margin Traders on Binance
Before sharing these important tips that will guide you to trade Margin safely and successfully, kindly note the following risks involved in leverage trading:
- Margin Trading carries a substantial risk and there is the possibility of both significant profits and losses,
- All of your margin balance may be liquidated in the event of extreme price movement,
- Also note that to protect your capital; you should make use of risk mitigation tools, such as stop-limit orders and proper risk management techniques.
Due to these risks, I have personally researched these (3) three important tips that if implemented will be your defensive weapon to minimize your risk of losing and maximize profits. Please note that the following tips should only be viewed as a guide to help crypto traders and not financial advice.
Tip 1: Watch Margin levels to Determine When to Reduce Loan or Increase Collateral
Margin levels are used to evaluate the risk level of your margin account and margin trades. The margin level is calculated as Total Asset Value of Margin Account/ (Total Liabilities + unpaid/Outstanding Interest).
To trade safely, a margin trader must constantly check his margin level to ensure that it is always within safe limits- that is the margin level is above liquidation level. Margin traders must take action to reduce their loan or increase their collateral to avoid liquidation when there is a margin call.
A margin call is an awareness message via text or email sent to the margin trader to give trade liquidation warning when the margin level is within the unsafe zone just before liquidation.
Every margin trader that pays attention to the margin calls and trade margin levels and takes proper action to reduce the borrowed loan or increase collateral to avoid liquidation will never lose and always make gains.
Tip 2: Determine When to Setup a Cool-Off and Implement it.
What does it mean for a margin trader to cool-off?
The crypto market is very volatile and requires that in order to protect capital and trade responsibly, a trader may need to go off the market temporarily. In order to allow for this, Binance launched the Cooling-off Period for margin trading. During this period, traders are not allowed to trade temporarily for the number of days set by the trader. A margin trader can set a cool-off period for a day or even up to a week in order to stop margin trading temporarily and resume when the market is favourable again.
Every leverage trader who takes advantage of the cool-off period will make more of profits than losses since he knows when to limit and control his trading activities especially in volatile market, when he feels pressured by losses and this feature ultimately allows traders to abstain from behavior and activities that can lead to irresponsible trading like “revenge trading”.
Tip 3: Make a Planned Decision to Trade with Isolated Margin or Cross Margin.
There are two ways to open a margin trade- either by using Isolated Margin or Cross Margin. The major differences between Isolated Margin and Cross Margin trade that margin traders must give attention to before opening a trade includes:
For Cross Margin, a margin trader can only open one cross margin account, and all trading pairs are available in this account; all the Assets in cross margin account are shared by all positions opened; Margin level is calculated according to total asset value and debt in the Cross Margin Account.
In the event of a margin call, the system will check the margin level of the Cross Margin Account and notify the trader via email or text message about supplying additional margin or closing positions, and if nothing is done, all positions will be liquidated.
For Isolated Margin, a margin trader will have to open an independent Isolated Margin Account for each trading pair, and only specific crypto currencies can be transferred in, held and borrowed in a specific Isolated Margin Account. For example, in the SOLBUSD Isolated Margin Account, only SOL and BUSD are accessible. This means that a trader will need to open several Isolated Margin accounts for trading different pairs, and the position opened is independent for each trading pair. If adding margin is required, even if you have enough assets in other Isolated Margin Accounts or in the Cross Margin Account, the margin will not be added automatically, and you may have to replenish manually. Margin level will be calculated solely in each Isolated Margin Account based on the asset and debt in the isolated margin trade.
In the event of a margin call, liquidation risk is isolated in each Isolated Margin Account and the trader is notified via email or text message about supplying additional margin or closing positions, and if nothing is done, that isolated position is liquidated and it will not affect other isolated positions.
To trade responsibly and be a successful margin trader, there is need to analyze the risks involved in both types of margin trades and draft a plan to choose either of them. This enables the trader to make an informed decision based on his technical and risk analysis. This will help the trader to choose the right parameters when setting up a margin trade.
These tips were gathered from the trading experiences of successful crypto margin traders and if implemented can yield great gains.
Crypto Leverage Trading in general has risks and Margin Trading shares the same traits; so acknowledge the risk that you could lose a percentage of your investment or even all of your investment funds, hence you must claim responsibility of your investment returns by trading safely.
Margin trading can help you to amplify or magnify the profits from successful trades if you take time to understand the fundamentals of Margin trading and utilize proper risk management techniques which includes the use of risk mitigation tools, such as stop loss and stop-limit orders.
It is very important that you always remember to DYOR before opening any margin trades. You may also need to expose yourself to educational contents like the ones in my archives to learn how to hedge your positions for safer margin trades. This research involves risk analysis, technical analysis and a consideration of the current market sentiments.
Margin trading, if wield properly can be the perfect weapon to magnify your profits, if all the odds are in your favour.
If you would like to take advantage of the ongoing Binance Margin Promo, here is a guide on how to get started with Margin Trading on Binance….
How to participate in the Binance Margin- Funday Friday
For a complete guide on how to participate in margin trading promo; see the image below:
How to Set up a Binance Margin Trade.
To set up a margin Trade
- Open a Binance account, complete KYC,
- if you already have a KYCed Binance account that you currently trade crypto with; simply go https://www.binance.com/en/trade-margin/BTC_USDT?ref=65177765 to trade BTC/USDT Margin pair.
- To trade the margin promo, use this direct link: https://www.binance.com/en/margin/margin-happy-friday?ref=65177765
- Open a margin trading account,
- Transfer collateral to your Binance Margin account,
- Go to the Margin Trade window and click Transfer,
- Select the token, input the amount and choose where you are transferring the fund from and click confirm.
- Next select the margin option whether cross margin or isolated margin and place a trade.
- Trade to meet the eligibility to claim rewards by ensuring that your daily average Margin trading volume is 1000 BUSD or more or make sure your average daily borrow amount should not be less than 100BUSD
- Claim your bonus when distributed weekly every Friday from 09:00
- Follow the same process weekly to continue claiming your bonus weekly.
Before investing in crypto related products, it is best that you take time to analyse and research. You can consider looking up Binance Margin Trading Guide on Binance Academy.
This article was personally researched and written to enlighten crypto investors and should not be viewed as a financial advice or an investment guide. Always do your own research!