How To Protect Your Assets When Using Margin Trading
Binance Margin trading is a method of trading crypto assets that allows traders to access larger sums of capital to leverage their positions by borrowing funds. Essentially, margin trading magnifies trading results, allowing traders to profit more from successful trades.
When trading on margin, it is critical to protect your assets. This article discusses the risks of trading on margin and the steps you may take to protect your assets.
Advice on How To Protect Your Asset When Trading On Margin.
While trading on Binance margin might be exciting, it’s important to be cautious so that you don’t end up disappointed and upset. Here are some suggestions for safeguarding your investments while trading on margin:
Choosing a trustworthy platform like Binance
_To secure your assets when trading on margin, the first step is to select a reliable platform.
_Binance’s markets have strong liquidity, in addition to tutorials that will lead you through trading margin effectively.
_And there are several trade pairs to pick from
_Given the peculiarities of margin trading, you don’t want to obtain loans from an untrustworthy platform.
_That is why I propose Binance, a great margin trading platform.
_Furthermore, the site has maintained a positive reputation since its inception in 2017.
_When you trade margin on Binance, you have nothing to worry about.
Keep Monitoring Your LTV
LTV stands for loan-to-value and is a ratio that compares the loan’s value to the market value of its collateral. A high LTV ratio implies a high level of financial risk and vice versa. Binance uses the LTV ratio to assess the risk level of your cross collaterals. When the LTV ratio hits the margin call level, Binance will send you a margin call notification via email or SMS, urging you to submit more collateral to lessen the risk of liquidation. If you do not reply correctly to this message, your collateralized assets will be forcefully liquidated, and you will get a liquidation call notification through email and SMS.
A liquidation charge of 1% of the loan amount will be required. To avoid collateral liquidation, you may always modify the LTV ratio.
Use Cross Margin Or Isolated Margin With Full Understanding
Cross margin and isolated margin are essential tools to know as a trader since they are successful trading techniques. To avoid liquidation in cross margin mode, the full margin balance is split across open positions. In the case of a liquidation, the trader risks losing their entire margin amount as well as any open positions if Cross Margin is enabled. The margin balance granted to a single position is known as an isolated margin. Traders limit their risk on individual positions by setting the amount of margin provided for each one when the isolated margin mode is enabled.
Which is the best option now? Both are excellent, but I prefer the cross margin since it has a greater potential to limit the danger of liquidation. As a result, it is more sustainable in long-term strategy, which necessitates positions that can withstand market volatility.
What Are The Benefits Of Binance Margin?
Multi-asset collateral
Binance allows its customers to borrow leverage by investing in different assets as collateral. The Cross margin mode makes this feasible. This is in place to provide traders with greater options when it comes to opening deals.
Insurance Fund
Margin traders on Binance may rest easy knowing that their assets are SAFU thanks to a $300 million insurance fund. This is to safeguard bankrupt traders from unfavourable losses while also guaranteeing that successful traders receive their full rewards.
Diverse Trading Pairs
Trading pairings are pairs of two or more cryptocurrencies, such as BTC and USDT, BUSD and BTC, ETH and BTC, and so on. On the Binance platform, you may trade on margin on various fascinating trading pairs with leverage up to 10X. Keep in mind that an asset’s price volatility will affect how much liquidity the market has for it; the higher the volatility, the less liquidity the market has. This is because the asset’s extreme volatility makes it exceedingly untrustworthy, and hence only a few deals are made on it in the market.
Cooling-Off Period
Binance has implemented this as a safeguard against excessive trading. Traders can use the cooling-off period to temporarily halt all margin trading for a certain period of time. Traders can choose from a one-day, three-day, or one-week cooling-off period. The margin accounts cannot be used to borrow cryptocurrency while the cooling-off period is turned on.
Arbitrage
When the funding rate on futures pairs is fluctuating, Binance Margin traders can take advantage of arbitrage possibilities.
For example, if the ETH/BUSD perpetual funding rate is negative, you may utilize margin to short the trade using ETH/BUSD while making a profit with a long-term ETH/BUSD perpetual transaction.
As a result, you are not constrained by the underlying asset price.
Therefore, you profit from market movements because the two transactions are in different directions.
Now, regardless of how the market performs, you’ve reduced your risk.
Binance Margin Offers Low-Interest Rates.
Binance Margin traders benefit from reduced yearly interest rates as low as 0.8 per cent with BTC, ETH, BUSD, and USDT from March 21, 2022, until further notice. For further information, see the link below.
Interest rates may vary depending on a user’s VIP status, margin pairings, and other variables.
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Conclusion
With its user-friendly interface and comprehensive features, Binance is a reliable platform for margin trading. It also features an insurance fund that safeguards users’ accounts against unanticipated losses.
We hope this article has given you some useful strategies to protect your assets when trading on margin. Trading on margin is a risky proposition, and you should never trade more than you can afford to lose.
