Here’s What Experienced Users Need to Know About Trading on the KuCoin Exchange: Part One

By Justino | An Angle of Truth | 19 Oct 2021

Congrats on reading up on the articles dubbed: Here’s What New Users Need to Know About Trading on the KuCoin Exchange - Part One through Seven. Now we move forward to more experienced traders who want to use the exchange through the other markets, Margin and Futures trading. These markets can amplify your profit, but will also expose you to increasing risks.

Margin Trading

Margin trading is a method of using funds provided by a third party to trade. For example, KuCoin currently provides up to 10x leverage. When your principal is only 1 BTC, you can borrow up to 9 BTC through KuCoin’s lending platform. You should note that leverage is used to amplify based on your existing principal. If you have no principal at all, you cannot borrow any funds.

In margin trading, other traders usually provide the money borrowed. When you repay borrowed money, you need to repay the principal and interest.

  • Advantages and Disadvantages of Margin Trading

The most obvious advantage of margin trading is that it allows users to magnify their principal and use small funds as a guarantee to make larger investments, and earn more profits. In addition, you can trade margin trading in both directions. Users can either go long when bullish, or go short when bearish. It’s a more flexible investment method.

However, when users suffer losses, margin trading also brings more losses to users. The higher the leverage is, the greater the losses may be. For this reason, it’s important that investors who decide to use margin trading employ proper risk management strategies and make use of risk mitigation tools.

  • Go Long or Go Short

Go Long: ‘A’ thinks that Bitcoin will rise from $10,000 to $12,000 in the future, and his/her account only has 10,000 USDT. If he/she directly buys Bitcoin and Bitcoin’s price rises to $12,000, he/she will make a profit of $2,000. If he/she uses 10x leverage, he/she can borrow another 90,000 USDT from the KuCoin lending market and make his/her invest able amount reach 100,000 USDT. By buying and selling Bitcoin, he/she will make a profit of $20,000 through his trading and magnify the yield by 10x.

Go Short: If ‘A’ thinks that Bitcoin will fall from $10,000 to $8,000 in the future, and his/her account only has 1 BTC, he/she can sell it at $10,000 and get 10,000 USDT, and then buy it back when it falls to $8,000. In this way, he/she will have 1 BTC + 2,000 USDT in his/her account, thus making a profit of 2,000 USDT compared to doing nothing at the beginning. If he/she uses 10x leverage, he/she can borrow another 9 BTC from the KuCoin lending market and sell it to get 100,000 USDT. After the price of Bitcoin falls, he/she will buy back 10 BTC and repay the 9 BTC that he/she has borrowed. Now he/she has 1 BTC + 20,000 USDT in his/her account, which also magnifies the yield by 10x.

In short, if you think Bitcoin will rise, then borrow USDT and go long Bitcoin; if you think Bitcoin will fall, borrow Bitcoin and short it. The leverage ratio is the multiple by which it may magnify your profits.


Disclaimer: This content is not financial advice, and for informational purposes.

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