In this article, I talked about how to protect your assets when trading margin.
Even in a market dip, profits are more guaranteed in margin trading than in traditional trading.
But margin trading is associated with a high risk of loss of assets.
If that’s your worry, then you’ve come to the right place.
By the time you’re done reading this post, you’ll know how to protect your assets while bagging your profits in margin trading.
Let’s get to it!
- How To Protect Your Assets When Trading Margin
- Why Choose Binance Margin?
- Enjoy Low-Interest Rates On Binance Margin!
Click on any item above to read its details immediately.
1. How To Protect Your Assets When Trading Margin
Margin trading is simply using funds provided by a third party to perform trades.
In other words, it allows traders to obtain more funds and support them in leveraging positions.
Traders opt for margin trading because it grants them larger profits on successful trades.
And as already mentioned, it’s pretty risky but there’s a safe way out.
Here are 3 tips that will help you protect your assets when trading margin:
a. Choose a trustworthy platform like Binance
The first thing you must do to protect your assets when trading margin is to choose a trustworthy platform.
Considering the uniqueness of margin trading, you don’t want to take loans from a platform that is not reliable.
That’s why I recommend Binance, an excellent platform for margin trading.
In addition to providing tutorials that will walk you through trading margin efficiently, Binance has high liquidity for its markets.
And there is a wide variety of trading pairs to choose from.
Also, the platform has maintained a good reputation since its launch in 2017.
You’ve got nothing to worry about when you trade margin on Binance.
b. Keep monitoring your LTV
The second way to protect your assets when trading margin is to keep monitoring your LTV.
LTV simply means loan-to-value ratio. It is the ratio of the value of your loan to the value of your collateral.
And it is important that you monitor it because it determines the risk level of your cross collaterals.
When the LTV ratio rises above a set threshold, your assets may be liquidated if you do not increase your collateral.
But if your eyes are on it, you will know when to add more collateral and avoid liquidation.
Gratefully, Binance sends you a notification (a.k.a Margin Call) when you need to add more collateral.
If any of these terms sound complex to you, you can check here for a clearer description.
c. Use Cross Margin or Isolated Margin with full understanding
Cross Margin and Isolated Margin are the two modes of margin trading.
And it is important you understand how they work before you start.
For the Cross Margin mode, all the margin balance is shared across open positions to avoid liquidation.
So, you risk losing your entire margin balance along with any open positions in the event of a liquidation.
Then for Isolated Margin, the margin balance is issued to an individual position.
Therefore, you manage your risk in your individual positions by controlling the amount of margin allocated to each one.
Once you’ve understood how they work, you can then choose the mode that suits you.
Earlier, I mentioned that Binance is an excellent platform for trading margin.
In the next section, I mentioned the advantages of using this platform.
2. Why Choose Binance Margin?
a. Diverse trading pairs
The first advantage of trading margin with Binance is the wide variety of trading pairs that you can choose from.
As of press time (17/05/2022), there are over 600 crypto trading pairs available.
This enables you to speculate and gain from the relative performance of two coins at once.
Also, you can trade pairs with leverage of up to 10X on Binance margin.
b. Multi-asset collateral
Another advantage of trading with Binance margin is the support of multiple assets for collateral.
This means that you can use multiple assets as collateral to borrow leverage.
And it is applicable in the Cross Margin mode.
So instead of investing ETH only into an ETH-based margin trade, you can use your ETH and BTC, or BUSD, USDT, etc., to denominate your collateral.
That way, you can operate with more flexibility when opening trades.
c. Cooling-off period
This is a period when all margin trading activities are temporarily suspended.
It is a precautionary measure to help users avoid excessive trading and unplanned losses.
You know what they say, “too much of everything is bad.“
Here, you can set a Cooling-off period of 1 day, 3 days, or 1 week.
During this period, you cannot borrow any cryptocurrencies from your margin account.
When the Cooling-off period is completed, you may resume your margin trading.
d. Insurance fund
Binance has a Margin Insurance Fund that is worth over $50 million.
This is used to repay your debt if your margin account goes bankrupt.
Also, you’re sure that your profits will be paid in full when you win trades.
Now, that’s some cool advantage. Isn’t it?
Lastly, Binance Margin traders can take advantage of arbitrage opportunities when the funding rate on futures pairs is volatile.
For instance, when the ETH/BUSD perpetual funding rate is negative, you can use margin to short the trade with ETH/BUSD while using a long futures ETH/BUSD perpetual trade to make a profit with low risk.
And as such, you are not restricted by the price of underlying assets.
Rather, you benefit from the markets’ actions because the two trades are placed in opposite directions.
So, you’ve minimized your risk irrespective of how the market trends.
Here’s some good news 👇
Recently, Binance reduced the Margin’s interest rates.
Find more details in the next section.
3. Enjoy Low Interests On Binance Margin!
From 21st March 2022 until further notice, Binance Margin traders enjoy discounted annual interest rates that are as low as 0.8% with BTC, ETH, BUSD, and USDT.
Have a look:
Interestingly, you may enjoy even lower rates depending on your level of verification on Binance. Find more details here.
Let’s answer some frequently asked questions and wrap up this post.
You can borrow up to 10 times your assets.
Also, assets with a value of more than 2 times your total debt can be transferred.
Two things – you either increase your collateral or reduce your loan.
But note that a margin level of 1.1 will automatically be liquidated.
That is, Binance will sell your funds at market price to repay the loan
Binance is a trustworthy platform for trading margin with its user-friendly interface and excellent functions.
Also, it has an insurance fund that protects users’ accounts from unplanned losses.
We have now come to the end of our discussion on how to protect your assets when trading margin.
I hope it was worth your time.
Click here to start trading margin on Binance right away.
And if you need a step-by-step guide you may check here.
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Do you have any questions? Please type them in the comments section below.
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