What’s Margin Trading

What is Margin Trading?
Margin trading refers to the practice of magnifying your actual funds with potentially amplified gains or losses. Please fully understand its risks before engaging in Margin Trading as the crypto market often swings drastically.

 

What are the risks in Margin Trading?
Margin Trading not only allows you to magnify gains with fewer funds but can also saddle you with amplified losses when the market moves against you. Therefore, we strongly advise entry-level users not to use highly leveraged trading to avoid forced liquidation or even bankruptcy.

 

Related terms and definitions
Margin account: Each margin account represents a margin pair. For example, you will have a BTC/USDT margin account for BTC/USDT margin pair and you are able to transfer BTC and USDT from your spot account to your BTC/USDT margin account.

Transferred assets: The assets you transfer from your spot account to your margin account.

Borrowed assets: The assets that you borrow against the transferred assets as Margin

Available assets: Assets that can be used to open positions including both your transferred and borrowed assets

Frozen assets: The assets that are in your margin account but cannot be used to open positions

 

How can I transfer funds to my margin account?
Crypto deposits cannot be made directly to your margin account, and your margin account can only receive transfers from your spot account. If you already have funds on loan, only the difference between Risk Rate and Transfer Risk Rate is available for transfer funds from your margin account to spot account (The Transfer Risk Rates for 3X and 5X leverage are 150% and 125% respectively); All the assets are available for transfer from Margin Account to Spot Account when there are no borrowed funds.

 

How can I borrow funds?
You may navigate to the Margin Trading or Margin Assets page, click on Borrow. The largest loan available = ( Total Assets - Unpaid Borrowed Funds - Unpaid Interest) * ( Highest Leverage - 1) - Unpaid Borrowed Funds

 

How is the loan interest calculated?
1) Interest calculation: The interest is calculated once every 1 hour upon each successful loan you make, and will not be accumulated over the unpaid interest. The interest rates may slightly fluctuate due to market volatility. 

2) Settlement: The loans are settled in chronological order with first the interest and then the borrowed funds being cleared. When both the loan and interest are paid, the status of the order will be changed to “Paid” and no more interest for this order will be calculated.  

3) Loan cycle: 10 days with Auto-renewal enabled by default. Auto-payment will be triggered if you default on the loan.

4) Auto-renewal: The loan is automatically renewed with the latest interest and cycle.

5) If Auto-renewal is disabled, alerts will then be made 72 hrs, 24 hrs, 8hrs, and 1 hr before the expiry date. When Auto-renewal is enabled but the Insurance Fund is insufficient to cover the loan, alerts will then be made with the expiry date extended by 24 hrs. After this 24 hrs, auto-renewal will be triggered if the loan still has not been settled by the user. The process will continue with auto-payment after another failure of auto-renewal.

6) If any airdrop, potential fork, etc takes place and generates new assets, please refer to the announcement for specific details.

 

How can I use leverage to magnify gains if I think the price will go up?
Supposing up to 3X leverage is available for BTC/USDT market, and you have 5,000 USDT in your account balance then you have MAX.10,000 USDT available to borrow. If you predict BTC price will rise from 5,000 USDT to 6,000 USDT, you can buy 3 BTC at the price of 5,000 USDT with a total of 15,000 USDT and sell them at 6,000 USDT, making a profit of 3 BTC * (6,000 - 5,000) = 3000 USDT. Margin Trading with 3X leverage triples the profit you could make with all the 5,000 USDT you actually have, which was supposed to be 1,000 USDT.

 

How can I use leverage to magnify gains if I think the price will go down?
Supposing you have 5,000 USDT in your account balance and MAX. 2 BTC to borrow from CoinEx with 3X leverage. If you predict BTC will go down from 5,000 USDT to 4,000 USDT, you can sell 2 BTC borrowed from CoinEx at 5000 USDT and buy back 2 BTC at 4,000 USDT, making a profit of 2,000 USDT. Without Margin Trading, you could only use the Buy Low and Sell High strategy and could not be able to short on BTC.

 

How is Index Price calculated?
1) CoinEx employs a unique Margin Index Price marking system to help users to avoid forced liquidation when the market swings drastically.

2) Weighted prices are drawn from a selection of mainstream crypto exchanges with an anticipatory mechanism at work to ensure the Index Price swings within an acceptable range even when the price on one of the exchanges swings drastically.

 

What can I do to lower down forced liquidation risk?
1) Reasonably leverage in Margin Trading and adjust your positions

2) Learn when to take profits or cut losses by liquidating your positions.

3) Add margin on your positions in time and make sure the ratio between Total Assets against Leverage is above 110%.

 

How are Risk Rate, Transfer Risk Rate, Risk Alert Rate, Forced Liquidation Rate and Forced Liquidation Price calculated?
1) Risk Rate: It is an index evaluating the risk of liquidation on your margin account.

Risk Rate = [ ( Total Quote Coins - Unpaid Quote Coin Interest )/Index Price + (Total Base Coins - Unpaid Base Coin Interest ]/(Borrowed Quote Coins/ Index Price + Total Borrowed Base Coins)*100%.

2) Transfer Risk Rate: The Transfer Risk Rate of 2X/3X/4X/5X Margin are respectively  200%/150%/135%/125%. If risk rate is larger than transfer risk rate, your account is rated as safe and the extra assets can be transferred outside your margin account.

3) Alert Risk Rate: It is determined by the market depth and trading volume for the specific margin pair. If Risk Rate is less than or equal to Alert Risk Rate, your account is rated as Dangerous and the system will send notifications to you via message and Email.

4) Forced Liquidation Rate:  It is determined by the market depth, trading volume, borrowed coin amount etc for the specific margin pair. If Risk Rate is less than or equal to Forced Liquidation Rate, your account is rated as Dangerous and the system will be triggered to forcibly liquidate your account before sending notifications to you via message and Email.

5) Liquidation Price Calculation: Liquidation Price = ( Borrowed Quota Coins * Forced Liquidation Rate + Unpaid Quote Coin Interest - Total Quote Coins)/(Total Base Coins - Unpaid Base Coin Interest - Borrowed Base Coins * Forced Liquidation Rate)

 

What is Margin Insurance Fund?
30% of the daily interest is added to Insurance Funds (Margin) every day to handle the bankrupt positions. CoinEx reserves the rights for future use of the funds. If the Insurance Fund (Margin) is insufficient to cover the remaining portion of the bankrupt positions, CoinEx will then pay for this portion. Under such circumstances, your CoinEx account is in debt with withdrawal function disabled. To clear your debt, you can either deposit funds to your Margin account or wait for Insurance Fund to be sufficient again which will pay off debts in chronological order.

 

How to loan through margin trading?
CoinEx users can use margin function to borrow coins through mortgaging assets. Trading pairs with different margin ratios correspond to different mortgage rates. It supports trading pairs with 5X margin, and the pledge rate is up to 80%. For the ETH/USDT trading pair, assuming the ETH index price is 3000USDT, you can transfer 3000USDT to a margin account first. If you borrow no more than 0.8 ETH, you can transfer all the borrowed ETH to the spot account. The ETH in the spot account can be withdrawn.

 

Risks
Margin Trading not only allows you to magnify gains with fewer funds but can also saddle you with amplified losses when the market moves against you. Therefore, we strongly advise entry-level users not to use highly leveraged trading to avoid forced liquidation or even bankruptcy.