In just 4 steps, you can make profits by margin trading:
1. Asset Transfer
2. Borrow
3. Trade
4. Repay
There are two ways to earn in margin trading:
1. Buy long: If you think the price will go up, you can borrow assets and buy cryptos at a lower price. When the price rises, sell them to profit from the price differences.
2. Sell short: If you think the price will go down, you can borrow assets and sell cryptos at a higher price. When the price drops, buy them to repay your debts and profit from the price differences.
Take BCH/USDT market for example:
Assuming 4x leverage is supported in this market, the current price for BCH is 200 USDT, and your available balance in Spot Account is 1,000 USDT and 5 BCH.
1. Buy Long
If you think that the price of BCH will rise, this is how you can buy long in margin market:
Step 1: Asset transfer. Transfer your available 1,000 USDT from Spot Account to BCH/USDT Margin account.
Step 2: Borrow. Based on your BCH/USDT available assets, you can borrow 3,000 USDT as (at) most.
Step 3: Trade. Now you have 4,000 USDT (principal + borrowed assets), you can buy 20 BCH at the price of 200 USDT.
Step 4: Repay. When the price of BCH rises to 300 USDT, you can sell 20 BCH to get 6,000 USDT and repay 3,000 USDT to the platform.
At this point, your profit is calculated as:
USDT obtained by Selling - USDT borrowed - Original available = 6,000 USDT - 3,000 USDT - 1,000 USDT = 2,000 USDT.
In this way, your profit is:
USDT gained from crypto sale - Borrowed USDT - Principal = 6,000 USDT - 3,000 USDT - 1,000 USDT = 2,000 USDT.
Note: For the convenience of calculation, factors such as borrowing interest and transaction fees are ignored in the above examples.
2. Sell Short
If you think that the price of BCH will drop, this is how you can sell short in margin market:
Step 1: Asset Transfer. Transfer your available 5 BCH (equivalent to 1000 USDT) from Spot Account to BCH/USDT Margin Account.
Step 2: Borrow. Based on your BCH/USDT available assets, you can borrow 15 BCH at most.
Step 3: Trade. Now you have 20 BCH (principal + borrowed assets), you can sell them at the price of 200 USDT for 4,000 USDT.
Step 4: Repay. When the price of BCH drops to 100 USDT, you can buy 15 BCH with 1,500 USDT and repay them to the platform.
At this point, your profit is calculated as:
USDT obtained by Selling - USDT repaid - Original available = 4,000 USDT - 1,500 USDT - 1,000 USDT = 1,500 USDT.
In this way, your profit is:
USDT gained from crypto sale - Borrowed USDT - Principal = 6,000 USDT - 3,000 USDT - 1,000 USDT = 2,000 USDT.
Note: For the convenience of calculation, factors such as borrowing interest and transaction fees is (are) ignored in the above examples.
Risk Reminder
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.
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