This is a crypto trading guide for Binance margin trading, including a review of the Binance leveraged tokens.
Binance margin trading let you trade with leverage. The leverage is limited to 3x or 10x compared to Binance futures trading where you can get up to 20x.
By using leverage margin trading gives you the possibility to increase the potential profits. However, the same is true in the opposite direction, a leveraged trading instrument will drain your assets faster as well.
We will go through how to open a Binance margin trading account and terms related to this such as cross margin, isolated margin, margin trading fees, liquidation.
If you are interested in other features on the Binance trading platform you should read our Binance review.
What is Binance Margin Trading?
Binance is one of the top Bitcoin trading sites and this is the place you want to be if you are about to do margin trading.
Binance margin trading is a trading method using funds provided by a third party.
In comparison to spot trading or a regular trading account, margin trading allows for sums of greater capital, also called leverage trading.
Margin trading, or leverage trading, amplifies trading results in both directions. This results in larger potential profits but to a higher risk.
Margin trading is especially popular in low volatile markets since you almost need some leverage to receive any movements. Such markets are fiat forex markets and sometimes commodities.
Still, margin trading is also used in stock and cryptocurrency markets. However, the available leverage is usually limited in more volatile markets.
Binance Margin Trading Example
- Collateral: What you put in from the beginning. If you buy 1 BTC for $10.000 and you use 3x leverage your collateral is $10.000 and your total initial exposure is 3 Bitcoin ($30.000).
- Margin Level: (Current total exposure / Borrowed amount) = $30.000/$20.000 = 1.5
Current total exposure is now: 3x $9.000 = $27.0000
Margin level: $27.000 / $20.000 = 1.35
How to start trading with margin at Binance?
There are a few steps you need to accomplish before you can start with margin trading at Binance.
- Sign up with Binance and open a Binance margin account
- Transfer collateral to your Binance margin account
- Auto-borrow trade
- Auto-repay trade
1. Sign up with Binance and open a Binance margin trading account
- Sign up with Binance
- Login to your Binance account
- Click on BTCUSD on the first screen or look for Trade in the header menu and click Margin
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2. Transfer collateral on Binance margin trading
Once you are in the margin trading screen you can transfer collateral.
First, make sure you are in the margin trading screen by checking the either Cross 3x or Isolated 10x is colored yellow.
If Spot is marked with yellow you will not see the transfer options since you are in the spot trading screen.
Click on any of the red squares in the screenshot below and you will get a popup in Binance where you can enter the information about your transfer.
3. Auto-borrow trade
Now you are ready to trade.
If you are about to go long on BTC, click Borrow under Buy BTC.
- In the price field: Set your limited price you are willing to pay per Bitcoin
- In the amount field: Set your total amount of BTC to buy. This can be maximum 3x what you have in your USDT wallet.
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4. Auto-repay trade
When you are ready to close your trade, you go to the right column under Sell BTC (if your initial order was Buy BTC).
Here, you mark repay.
Set the price you are willing to sell your BTC for.
In the amount field, set how many BTC you are willing to sell.
Binance Margin Trading Fees Review
Binance margin trading fees are separated by maker and taker fee.
There are two fees a trader must be aware of when using Binance margin trading.
Those fees are
- Trading fees
- Margin borrow interest rate
What is Binance Cross Margin 3x?
In Binance cross margin mode, the margin is shared across the user’s account. You can only have one Binance cross margin account.
What does this mean?
Lets refer to the Binance margin trading example above.
In that example you bought 1 Bitcoin for $10.000 with 3x leverage to get a initial total exposure of $30.000
Lets say you also buy 1 ETH for the price of $1.000 each with 3x leverage. This gives you a total ETH exposure of $3.000
Now, the Bitcoin price rises to $11.000 and the Ethereum price decreases to $900.
What is your margin level with cross margin?
Margin level with cross margin: ($33.000+$2.700) / ($20.000+$2.000) = 1.62
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What is Binance Isolated Margin 10x?
In isolated margin mode, the margin is independent in each trading pair:
Each trading pair has an independent isolated margin account. Only specific cryptocurrencies can be transferred in, held, and borrowed in a specific isolated margin account. For instance, in BTCUSDT isolated margin account, only BTC and USDT are accessible. You may open several isolated margin accounts.
In the example above, under the Binance cross margin section we can calculate isolated margin instead
Isolated margin level for Bitcoin: $33.000/$20.0000 = 1.65
Isolated margin level for Ethereum: $2.700/$2.000 = 1.35
What is Binance margin liquidation?
If your margin level drops to 1.1, your assets will be automatically liquidated, meaning that Binance will sell your funds at market price to repay the loan.
Binance Leverage Trading Alternatives
Futures trading offers you to use higher leverage with more risk. Also, remember that futures does not follow the spot price.
In addition, Binance is offering the leverage tokens which is more for beginners looking for trying to invest with leverage the first time. There is no risk for liquidation but you might want to double check all the fees before you start trading with the leverage tokens.
No leverage trading is for long-term investing since you are paying an interest on the borrowed funds and there is also risk for volatility decay.