How to Make Profits by Margin Trading

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In just 4 steps, you can make profits by margin trading: 

Transfer, Borrow, Trade, and Repay.

 

There are two ways to earn in margin trading:

1. Margin Buy Long: If you think the price will rise in the future, you can borrow assets and buy at a low price, and sell it after the price goes up, thereby earning the price spread.

2. Margin Sell Short: If you think the price will drop in the future, you can borrow assets and sell at a high price, and then buy to repay after the price goes down, thereby earning the price spread.

 

Take BCH/USDT market for example:

Assuming 4x leverage is supported in this market, the price for BCH is 200 USDT, and your available balance is 1,000 USDT and 5 BCH.

1. Margin Buy Long

If you think that the price of BCH will rise, this is how you can buy long in margin market:

Step 1: 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 most. Step 3: Trade. You now have 4,000 USDT to trade (original + borrowed), and buy 20 BCH at the price of 200 USDT each. Step 4: Repay. When the price of BCH rises to 300 USDT, by selling your 20 BCH, you obtained 6,000 USDT and repaid 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. 

By Margin Buy Long, you can profit from price rising.

2. Margin Sell Short

If you think that the price of BCH will drop, this is how you can sell short in margin market:

Step 1: 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 as most. Step 3: Trade. You now have 20 BCH to trade (original + borrowed), and you sell them all at the price of 200 USDT each 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. 

By Margin Sell Short, you can profit from price dropping.

Note: For the convenience of calculation, factors such as borrowing interest and transaction fees is 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.