Binance Margin Guide: Notes to know to avoid losing money when trading

TutorialsSeptember 7, 2021

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Binance Margin Guide: What is Binance Margin? What should be kept in mind when trading? If you are used to investing in cryptocurrencies on other platforms, switching to Binance will feel like many unfamiliar trading features. The Margin feature on Binance is a prime example. In this article, we will learn about this feature.

What is Binance Margin Trading?

Margin trading on Binance, also known as margin trading. In simple terms, margin trading is when you use your Binance loan to open a trade many times higher than your own capital.

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E.g.:

  • You have 10,000USDT in your Binance account. The BTC price is now 10,000USDT/BTC. You open a regular Buy BTC order. You can only buy 1BTC. After that, the BTC price increased to 11,000USDT/BTC. You sell 1 BTC you bought earlier, and get 11,000USDT, a profit of 1,000USDT compared to the beginning.
  • In another transaction, you have 10,000USDT in your Margin wallet. The BTC price is also at 10,000USDT/BTC. You open an order to Buy Margin 3BTC. At this point, you have used your 1,000USDT and the 2,000USDT borrowed by Binance. After that, the BTC price increased to 11,000USDT/BTC. You sell the 3 BTC you bought, earning 33,000USDT. You pay 20,000USDT borrowed (assuming interest is 0), receive 13,000USDT into your account, profit 3,000USDT with only 10,000USDT initially.

* See more: The complete guide Binance from a to z

Notes to know to avoid losing money when playing Margin Binance

1. Advantages of margin trading

Binance Margin Trading Makes You Big Profit: Playing Binance Margin can make you a bigger profit than opening a similar trade when trading regular coins. This is the most prominent advantage that attracts people when investing in coins and cryptocurrencies.

Binance margin trading makes it possible to diversify your investment portfolio. Since you can use borrowed capital with the same initial capital, you can open more positions.

Binance margin trading makes it easy for you to enter trades without large capital.

2. Disadvantages of Margin Trading Feature.

Margin is easy to lose: Margin is like a double-edged sword. The more chances you have, the higher the loss. If you make the wrong trading decisions, you will face bigger losses.

Margin trading carries a high degree of risk. The more you lose, the more likely you are to face the risk of unintended trade liquidation.

3. Use BNB as a transaction fee to get 25% off the transaction fee

As learned in previous articles, if you use BNB to pay for transaction fees, you will receive a 25% fee reduction. Therefore, to avoid losing many Margin trading fees, you can enable payment of transaction fees with BNB.

Note, you need to have enough balance in your BNB wallet to use as your transaction fee. If there is not enough BNB balance in your account, you will be charged as usual.

4. Distinguish Cross and Isolated Margin

The Cross and Isolated Margin feature allow players to choose how their capital is used to avoid liquidating their trading positions.

Binance Margin
  • What is Cross margin? Cross Margin is your use of your entire account balance to avoid being liquidated when your position is trending against the market. When a forced position is liquidated, you may completely lose your account. However, if your account is larger than the market drop, your position can be left in place until you want to take profit on your position.
  • What is Isolated Margin? Isolated Margin only allows your margin balance to be used to avoid your position being liquidated. When the market goes against your position, your position is forced to close if the loss is greater than the margin balance.

When your position goes against the market trend, you won’t tell when the market will get back on track with your trade. Therefore, using the entire balance to keep the position liquid is risky and can lead to losses.

While investing, you should only use a certain amount of capital to be ready to lose for a trade. If you made the wrong decision in a position, accept the loss on that trade and look for another opportunity. That’s exactly how Isolated Margin works. And Investiki.com recommends you use this feature to ensure the safety of your investment.

Conclusion: Binance Margin

Play Margin on Binance helps you have bigger profits, diversify your portfolio, and open more positions with the same capital as conventional trading. You may be used to being on the big main supply to get more money in the margin of transaction.

Trading on native margin can also cause you to lose more. You will have to risk losing more than your initial investment. Do that; here is also a high transaction feature.

The following article Investiki.com will guide you on opening a Margin trading account and detailed step-by-step instructions to play Binance Margin.

However, investing always reminds you: Investing in cryptocurrencies without a lot of experience and knowledge is very risky. But outside the trading margin, the opportunity to increase profits also contains many potential risks. Therefore, you should carefully consider the level of risk tolerance and only use the available capital that you can lose to trade.

Especially for investors who are new to the cryptocurrency market, absolutely avoid using margin. You should only use the normal information to use for the loss of loss. In particular, you also equip yourself with the knowledge and entire trading strategy before entering the cryptocurrency market.

Investiki.com

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