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By learning margin trading in Binance, you can get more opportunities in trading in the world of cryptocurrencies. Binance digital currency exchange added Margin Trading option to its site in order to improve trading capabilities. Binance is trying to provide an environment for traders who can consider an amount under the title of guarantee or margin during trading and increase their assets and expand their profit range.
Of course, the important point in the training of margin trading in Binance is that in leveraged transactions and margin trading, the possibility of loss and the risk of losing the entire capital will also increase.
By learning how to do margin transactions in Binance, users can increase their profitability and purchasing power by borrowing funds and using leverage in Binance instead of normal buying and selling in the spot market.
Paying attention to the increase in the risk of loss, especially in the volatile market of digital currencies, is one of the important points for those who have started margin trading training. Therefore, the training of margin trading in Binance and the use of this strategy are recommended only to professional traders and investors.
But if you still intend to do it by accepting the financial risk and loss in these transactions, I have provided a complete Margin Trading training on the Binance platform in the rest of this article.
Margin trading training in Binance exchange
Margin trading and trading training in Binance exchange is learning one of the types of trading methods in Binance exchange. Binance exchange is one of the most famous and reliable exchanges active in the field of digital currencies. Leveraged trading or margin trading is a type of transaction in the Binance exchange, in which a part of the trader’s capital is provided by the exchange as a loan.
Margin trading training in Binance can help you to increase your purchasing power and profitability by allowing access to more money and providing leverage or leverage on positions. In the continuation of this article, I will explain to you some of the concepts of this topic, including advantages, disadvantages, margin call, liquidation price, index price, etc.
It should be noted that the values of liquidation price, index price and margin level will be automatically calculated for you and will not require your manual evaluation. But getting to know the policies and formulas of Binance to learn how to calculate margin and these values in the training of margin trading in Binance is not without grace.
Read more: What is leverage in digital currency?
Benefits of Margin Trade Training in Binance
To learn and train margin trading in Binance, it is better to first familiarize yourself with the important advantages of Binance Margin trading:
Collateral with different assets
Binance Margin users can use various assets as collateral for leveraged trading and borrowing. In the Binance exchange, this is possible by using the cross-margin mode. Therefore, you can use other cryptocurrencies such as Binance Dollar, Ether, Tether, etc. as collateral instead of BTC collateral for Binance Margin Bitcoin transactions.
Margin Insurance Fund
Binance Margin transactions have an insurance fund and take care of their account when the equity reaches below zero or when users are unable to pay due to lack of capital in their account.
Cooling-off Period
In order to help prevent excessive transactions, users can use the Binance Cooling-off Period function and stop their activities for a certain time. This feature is one of Binance’s efforts to prevent hasty behavior and encourage users to make thoughtful transactions.
Various trading pairs
Binance Margin trading has more than 600 trading pairs such as pairs that are not offered on many other platforms.
Trading training and trading margin in Binance and calculating the interest rate of the transaction
In learning how to do margin transactions, it is important to pay attention to the fact that the interest rate of the account is calculated on an hourly basis. Below are the general points:
- If you borrow and repay it in less than an hour, the interest rate will be calculated for you in one hour.
- If the daily interest rate is equal to 0.02%, the hourly interest rate is calculated by dividing 0.02% by 24.
Interest I = P (money owed) × R (hourly interest) × T (per hour)
An example of Binance trading margin training to calculate the interest rate of the transaction
If you took a loan for 1000 Tether units at 13:20 in the afternoon and returned the loan at 14:15, the interest rate of your transaction is equal to
0.01666667 = 2 × (0.02/24%) × 1000
Click on the button below to view the latest interest rates for Binance Margin transactions, loan limits and other details related to digital currency loan interests in Binance Exchange.
Margin trade training on how to calculate the liquidation price
In the training of margin trading, it should be mentioned that you do not need to manually calculate the liquidation price for your positions. These amounts will be automatically calculated and displayed in your Margin account for each open position.
However, in order to obtain more information on the training of margin trading in Binance and to clarify how to calculate the margin, in this section we refer to the details published by the Binance website.
Position liquidation price formula for cryptocurrency i
| مفاهیم | معانی |
|---|---|
| i | Currency i |
| Ai | Total amount of currency i |
| Li | Amount owed in x currency |
| Ri | Amount of interest payable for currency x |
| Pi | The index price of the currency pair x/Bitcoin (or Tether) |
| II | Liquidation price of currency x |
In this case, the position liquidation process starts when the ratio of risk to liquidation risk is reached.
Risk ratio formula
(interest payable + total amount owed) / total assets = risk ratio
Marj liquidation price formula for currency i
Binance margin trading training and how to calculate the index price
In the training of margin trading in Binance, you may come across the question, what is the index price? The Index Price is a basket of prices collected from major spot exchanges such as HitBTC , AKX , Bitmax , GateIo , Hubei , MXC , Poloniex and FTX. The weighting of this price is based on the weight associated with each price in each exchange. The formula for calculating the index price is similar for futures and margin transactions in the Binance exchange.
As we mentioned in the above section of the Margin trading tutorial in Binance, the calculation of these values can be seen automatically in the section related to the open margin position, and you do not need to calculate it manually.
In order to prevent poor performance caused by communication problems and spot market price disturbances, Binance exchange has taken additional protective measures, which I will mention below:
Deviation of multiple price references
If the deviation of the last price is greater than 5% in more than one exchange, the average price of all resources is used instead of the weighted average to obtain the index value.
Deviation of single price reference
When the deviation of the last price of a specific exchange is more than 5% of the average price of all references, the weight of the price is temporarily considered equal to zero.
Last transaction price protection
When the matching system of the brand price and index price does not have access to a stable and reliable reference data source, this price will not change due to the influence of single index contracts. In this situation, the protection mechanism of the latest transaction price is activated to update the price of the mark until it returns to normal.
This mechanism will temporarily change the mark price (to calculate the liquidation call level and unrealized profit and loss) to the last transaction price. In fact, this mechanism can prevent the unwanted liquidation of accounts.
Exchange communication problems
If it is not possible to access the data source of an exchange that had new trades in the last 10 seconds; The latest available price information is used to calculate the index price. However, if the exchange does not have updated transaction information in the last 10 seconds, a weighted average of zero should be considered to calculate the weight of this exchange.
Learning how to calculate margin and margin call for transactions in Binance
Binance uses the margin level to calculate the risk level of your account. The Margin Level calculation formula is different in Isolated and Cross margins.
Cross Margin level
In Binance Margin trading training for cross type, users are able to use the net value of their assets in all cross margin accounts as collateral. Therefore, it is not possible to use digital assets in other isolated accounts as margin for such trades.
Cross Margin level margin calculation formula
(Delayed interest + total liabilities) / total value of assets in the cross margin account = margin level of the cross account
| مفاهیم | معانی |
|---|---|
| arrears interest | The outstanding interest is equal to (amount of each margin loan x loan time (in hours) x hourly interest rate) minus the deduction/payment interest |
| Total debts | Current market value of overdue loans in Cross Margin |
As of 07/16/2020, Binance has reduced the leverage applied on Cross Margin transactions from 5x to a maximum of 3x. Therefore, the method of calculating 3x leverage will be based on the following:
| مفاهیم | معانی |
|---|---|
| Margin level > 2 | It is possible to make trades, transfer additional assets and borrow money to Wallet Spot. |
| 2 ≥ margin level > 1.5 | You can borrow and trade, but you will not be able to transfer digital currency from the margin account. |
| 1.5 ≥ margin level > 1.3 | You will be able to trade, but you will not be able to transfer cryptocurrency from the margin account or borrow. |
| 1.3 ≥ margin level > 1.1 | Origin Call will be activated and the system will warn you to add collateral through email, SMS and site notification to prevent liquidation of the position. After the first warning is received, subsequent warnings are issued every 24 hours. |
| Margin level ≥ 1.1 | All your assets will be liquidated in order to repay the loan and its interest by activating the liquidation engine. This position is also sent by email, notification, etc. It will be notified. Liquidation is stopped by depositing collateral or reducing leverage (margin level return to 1.5). |
Margin Level Isolated Margin
At this margin level, it is possible to use the net assets in the isolated account as collateral only for the same account. Therefore, assets in other accounts such as isolated and cross cannot be used as collateral for an isolated account.
The formula for calculating the margin level of the isolated account
(unpaid interest + total value of liabilities) / total value of assets in the isolated margin account = margin level of the isolated account
| مفاهیم | معانی |
|---|---|
| The total value of the assets in the isolated margin account | Nominal assets in current isolated account + total value of all assets |
| Unpaid interest | This amount is equal to the length of the loan period (in hours) × the amount of each loaned asset × the hourly interest rate minus the interest paid. |
| Total debts | The total value of all outstanding assets in the current isolated account |
In Isolated Margin transactions, the margin call ratio, initial ratio and liquidation ratio are as follows:
Margin Call Ratio (MCR)
When 2 ≥ margin level> If it is MCR, it is possible to trade and borrow, but it is not possible to transfer cryptocurrencies. The MCR value is different for each lever. For MCR example, 3x leverage is equal to 1.35, for 5x leverage it is equal to 1.18 and for 10x leverage it is equal to 1.09.
Initial Ratio or IR
This ratio is different for each loan and is equal to the initial risk rate after borrowing. For example, IR< 3x equals 1.5, the value of IR< 5x equals 1.25 and IR< 10X is equal to 1.11.
Liquidation Ratio (LR)
MCR ≥ margin level> LR is when the margin call is activated. In this case, the system will warn you by SMS, site notification and email, and this warning will be repeated every 24 hours. These warnings are stopped when the margin level ≥ MCR is reached.
As you can see in the image below from the training of margin trading in Binance, the margin level will be shown on the right side.
In this section, the term risk can be changed to Moderate or Low or High depending on the market movement. Therefore, if the price movement is against your expectation, there will be a possibility of liquidation of the position.
You can also select the Position option to check your account details. By clicking on the USDT Benchmark option, it is possible to calculate the values of positions based on Tether.
Liquidation fee and insurance fund tips in Binance Margin Trading Training
Margin Insurance Fund (Margin Insurance Fund) is for when the user is not able to repay the debt of his cryptocurrency loans. In fact, this fund is designed to compensate for losses caused by Binance’s isolated equity or margin account reaching below zero. In this program, Binance deposits the Liquidation Clearance Fee as profit from crypto loans or a part of the income of margin transactions to the fund.
Below I mention the rules of the Binance Margin Insurance Fund:
- The system uses the margin insurance fund in case there is not enough money to repay the debts or the bankruptcy of the margin account, after the implementation of forced liquidation (Forced Liquidation), which causes the creation of negative equity (debt), to repay the debt.
- In a similar situation, if there is a lack of collateral for debt repayment and digital currency loan bankruptcy, the system uses the insurance fund.
To check the balance in the insurance fund, you can go to the Wallet tab and then
Margin –> More Data –> Insurance Fund
click
Liquidation Clearance Fee
When your cryptocurrency loan order or margin account is forced liquidated, the margin insurance fund will charge you a percentage as a clearing fee. You can check such fees from the Clearance Fee History section of your Carjin account. However, my advice to you to prevent this from happening is risk management. Note that your liquidation price is still fixed.
| محصول | کارمزد لیکوییدیشن |
|---|---|
| Cross margin | Cross Margin Liquidated Assets x 2% |
| Isolated margin | Liquidated Assets Isolated Margin × Clearing Fee Rate Depending on Tiered Leverage |
| Cryptocurrency loan | Cross Margin Liquidated Assets x 2% |
Calculation of Tiered Leverage value
(Maximum amount that can be deducted less than the value of the remaining assets after liquidation) 8% x (1 – the liquidation risk ratio of leverage classified in the liquidation process)
Example of liquidation clearance fee rate
If the ADA/ETH pair category is equal to 3 and your position is liquidated, the calculation of the liquidation clearance fee will be as follows:
1.32% = 8% (1 – 1.165)
Margin trading training steps in Binance
In the following, I plan to teach margin trading in Binance how to open an account, make transactions and borrow, buy, transfer cryptocurrency from the spot trading digital currency wallet to the margin wallet, return the money to the normal Binance account and repay the loan.
At this point, you should watch the video tutorial shown to increase your understanding of the Binance Margin Trade tutorial and answer the quiz afterwards. After watching the training video on margin trading in Binance, select the Start the Quiz option and answer the displayed questions.
Now you will be able to transfer cryptocurrency to your margin account and trade in it.
Margin trade training in Binance: How to buy and transfer cryptocurrency
After buying cryptocurrency and activating your margin account, you can transfer the cryptocurrency from the normal Spot wallet to the Margin Trading Wallet on Binance. For this purpose, you must select the Wallet tab and select the Margin option.> Select Transfer.
In the next step of training on margin trading in Binance, you should choose the coin you want to transfer. Here, for example, after buying Binance Coin, I have chosen BNB Coin. Then, in the Amount field, you must specify the amount of Binance Coin and select the source account from the From section. In the To section, enter the destination account such as isolation or cross margin and then select Confirm.
How to make margin transactions in Binance: Borrowing cryptocurrency
After transferring the amount of BNB coins to the Margin wallet, you will be able to use them to get a loan as collateral. In fact, the wallet margin balance determines the amount of your capital for borrowing at a fixed ratio of 5:1. For example, if you have 1 coin in your account, you will be able to receive another 4 units as a loan. Here, I intend to receive a loan of 0.02 bitcoins for you with the collateral of Binance Coin. For this purpose, select Borrow/Repay option.
After choosing the desired amount of loan and coin, select the Confirm Borrow option. As can be seen, in this section, the hourly interest rate and the maximum amount of loan that can be received will be shown to you.
In the next step of learning Margin trading in Binance to transfer cryptocurrency, bitcoins will be transferred to your account and you can use it for trading. As I said about the interest rate in the previous sections of the Binance margin trading tutorial, this rate is updated hourly. You can view the status of your margin account in Binance through the Wallet Balance page and clicking on the Margin option.
Margin trading training in Binance: How to trade
In this part of the Margin trading training in Binance, to learn how to trade, you should do normal trading with stop-limit and OCO orders. At the time of starting Margin trading, the trader must have a percentage of the total value of the order as his assets. This type of initial deposit will be considered as margin, which is closely related to the concept of leverage. In other words, margin trading accounts are used to create leveraged transactions. Leverage represents the ratio of received loans to margin. For example, in order for a trader to open a $100,000 position using a 10:1 leverage, he needs to deposit $10,000 of his capital.
In Binance exchange, in order to receive buy trading loans, you must go to the Exchange page and after selecting the Margin option, set the Stop-Limit and Limit items to take your position.
Training on margin trading in Binance: How to repay the debt
In order to repay the debt, you must select the Borrow/Repay option on your trading margin page. Then click on the Repay tab.
The total amount payable for the debt is equal to the sum of the total amount owed plus the interest rate. In this section, it is necessary to note that before proceeding with the steps, you must make sure that your account balance is sufficient. Then you have to choose the cryptocurrency you want to refund and click Confirm Payment. It should be noted that if, for example, you have put BNB as collateral, you can only use this cryptocurrency to repay your debt.
Margin trading training on the Binance platform: How to return funds to the main account
In order to return the cryptocurrencies from the margin wallet to the regular wallet and Binance spot, you must click on the Transfer option on the Margin trade page. Then, change the transfer direction from the button between the From and To wallets and change it to Cross Margin To Fiat nad Spot. At the end, click on the Confirm option at the bottom of the page.
With this option, you can transfer funds between all wallets without paying any fees. But you should be careful that if you have debt assets, the possibility of liquidation of your position and risk level will also increase with the withdrawal of digital currency from the wallet margin.
Binance margin is one of the features of Binance exchange that allows users to use borrowed funds and increase position. This feature provides access to more capital for leveraged trading.
Users can borrow up to 65% of their collateral value for 180 days on Binance loans.
Yes. In order to be able to withdraw assets from the margin wallet to other wallets, according to the margin level, you will have to repay the debt along with its interest.
People’s acceptance and trust in cryptocurrencies is their support. Most of the people who have been affected by currencies without fiat support have been encouraged to learn digital currency and invest in it due to the decentralization and transparency of digital currencies.
