Binance — Margin Trading Tutorial | Explained in Detail!
A margin account allows you to borrow funds to perform leverage trading. Compared to regular trading, margin trading poses a higher risk due to the volatility of the crypto market. This means, with the help of leverage, you can earn more profit or you can lose more.
You need a Binance account to do margin trading. If you don’t have a Binance account, you can create one using my referral link.
Video Tutorial in Hindi (हिंदी) →
Watch the below video only if you understand The Hindi Language.
The video will be easier to understand. If you don’t understand the Hindi language, continue reading…
How Does PnL Work in Margin Trading?
Profit or loss always depends on the price direction. In order to make a profit in a long position, the price should go up and for a short position, the price should go down. If the price will go in the opposite than your predicted direction, you will lose money.
For example, suppose you want Long ETHUSDT using Margin.
Margin Account Balance: 2500 USDT.
You bought 3 quantities of ETHUSDT at the price of 2500 USDT.
Total investment value 3 * 2500 = 7500 USDT(5000 Borrowed).
Profit Example →
After a few hours, the Price of the ETH increased from 2500 to 2750 USDT.
You sold 3 quantities of ETHUSDT at the price of 2750 USDT.
Total selling value 3 * 2750 = 8250 USDT.
Total Profit 8250 USDT - 7500 USDT = 750 USDT.
Loss Example →
After a few hours, the Price of the ETH decreased from 2500 to 2400 USDT.
You sold 3 quantities of ETHUSDT at the price of 2400 USDT.
Total selling value 3 X 2400 = 7200 USDT.
Total Profit 7500 USDT - 7200 USDT = 300 USDT.
Note: The calculation result is for reference only, the interest generated during the borrowing period and trading fee may affect the final PNL & ROE.
As you can see in the above example, Profit or loss depends on the price movement. If the price of a coin will go in the predicted direction, you will earn more money otherwise you can also lose money.
Steps To Do Margin Trading →
You need to have a KYC verified Binance account with 2FA to do margin trading. If you don’t have a binance account, you can use my referral link to create one.
Open a Margin Account
Login to your Binance account → Go To Trade → Open Margin. In case you prefer using Binance App. You can go To Trade → Select Margin.
If you’re opening this section for the first time, you will see an account opening message. Click on the Open Account button and Accept the T&C to open a margin account.
Now Before we start trading, it’s important to understand all the options.
Cross VS Isolated Margin
Here you will see two different margins: Cross and Isolated. Cross margin supports up to 3X Leverage in all trading pairs while in the Isolated Margin, you can use up to 10X Leverage depending on the trading pairs.
When you transfer funds into the cross margin, you will see only the cross margin. This means, your funds will be shared between all trading pairs.
But when you will transfer funds into any isolated margin pair, you will see the name of that pair. This means, your funds will be restricted to the selected pair only.
Let’s understand this with a real example.
I have my funds into the cross margin and I can see my funds in the BTCUSDT pair.
When I switched to ETHUSDT, I can still see my funds because my funds is in the cross margin. I can trade whichever pair I want in the cross margin.
Now Let’s see what happens in the Isolated Margin. As you can see in the below screenshot, I transferred my funds in BTCUSDT Isolated Margin and I can my funds.
But when I switched to ETHUSDT, I cannot see my funds because the funds are restricted only to the BTCUSDT pair in the Isolated Margin.
Borrow & Repay use in Long & Short
Here You will also notice three different modes: Normal, Borrow, and Repay.
- Normal: You can use this option to place an order directly with existing assets in your account.
- Borrow: You can use this option to borrow funds using leverage.
- Repay: You can use this option at the time of closing position to repay the loan with interest.
You can use the Borrow option from the left side(Buy section) to long using leverage and at the time of closing the long position, you need to use Repay option from the right side(Sell section) to repay the loan with interest.
Similarly, You can use the Borrow option from the right side to short using leverage and Repay option from the left side to repay the borrowed funds.
Margin Level/Risk Meter
The risk level changes according to the price movement of your active trading pair/position. When no trade is active, you will just see 999 in the risk level.
If the margin level drops to 1.3, you will receive a margin call, which is like a notification. This means you should either deposit more funds to a margin account or reduce your loan by repaying what you’ve borrowed.
If your margin level drops to 1.1, your funds will be automatically liquidated. This means Binance will automatically sell your funds at market price to repay the loan.
Open the Margin Trading section → Click on the Transfer Button. If you’re on the app, you can click this transfer icon.
Now select the wallet in From and To section. You need to select the wallet where you have funds in the From section.
After that, You need to select the wallet where you want to transfer the funds.
Note: If you want to transfer funds to the Isolated Margin, You will also have to select the trading pair that you want to trade.
After that, Select the coin → Enter the amount → Click Confirm. Your funds will be transferred instantly.
Steps To Trade
Select a trading pair from the list that you want to trade and scroll down to the trading section.
As you can see in the below screenshot, I selected cross margin because I transferred my funds into the cross margin. You need to select Isolated if your fund is in the Isolated margin.
Switch to Borrow Mode to long using Leverage → Enter the price at which you want to long (or Select Market to purchase at the market price)→ Enter the amount you want to buy and click on the Buy button.
After that, click on the Confirm button.
As you can see in the below screenshot, After the successful order I have around 2.8 Link Coin and around -20 USDT. Whenever I will sell my link coin, I will also have to return this borrowed amount with interest.
Now Let’s see how to Repay the Loan.
As I said earlier, you need to use Repay option from the Right side to repay the borrowed amount for a long position.
Select Repay → Enter the amount you want to sell → Click on the Sell Button.
Note: You don’t need to sell 100%, you can also sell 50%, 25%, or just whatever you’ve borrowed.
After that, click on the confirm button. Then it will repay the borrowed amount and the rest balance(with profit/loss) will be refunded to your margin account.
You can follow the same steps to short any coin. Just remember to Borrow from the right side(or sell section) and Repay from the left side(or buy section).
You can use up to 10X Leverage in margin trading, which means you can earn up to 10X more money compared to SPOT Trading. Margin trading is very good if you will use it wisely. However, If you will use margin trading as a money-printing machine, you will end up losing money instead of earning.
Now, This article has come to an end. I hope you found this article helpful. However, if you have any queries and questions, please ask in the comment section below.