How to use margin to magnify gains if you think the price will go down?
Take BCH/USDT trading pair and up to 4X leverage supported as an example. If the price of BCH will go down from 250 USDT to 200 USDT and you have a principal of 1 BCH, then 3 BCH can be borrowed from the platform. You sell 4 BCH at the price of 250 USDT for getting 1,000 USDT. If the price of BCH go down to 200 USDT, and you use 600 USDT to buy 3 BCH for repayment.
The profit is: 1,000USDT-600USDT-250USDT=150USDT. If you use your principal to make spot trading, you can only buy low and sell high.
Note: In order to simplify the calculation of the above process, the calculation of the borrowing fee is omitted.
Description for Margin Trading Page：
1. Search bar and market area
2. Trading pair and basic market information
3. K-line market and depth chart
4. Fee discount setting and rate of maker & taker
5. Margin introduction and market selection area
6. Margin trading pair information area
7. Order placing area
8. Proportion of buying & selling
9. Market handicap depth area
10. Trade history area
11. Current orders area
12. Orders history area
If you judge the price of BCH will go down and short sell, you need to borrow BCH from the platform, and then use principles plus the borrowed BCH to sell BCH at a higher price. When BCH price goes down to the expected price, you can buy it at a lower price, return the borrowed coins and interests to make profits. The detailed steps are as follows:
Step 1: Check trading pairs supported
Step 2: Transfer assets to a margin account
Step 3: Borrow BCH
Step 4: Sell BCH at a higher price
Step 5: Buy BCH at a lower price
Step 6: Return the borrowed coins and interests
Step 7: Transfer margin assets to spot accounts
Take 1 BCH and 4X margin for short BCH as an example:
Step 1: Check trading pairs supported
1. Visit CoinEx website www.coinex.com, and after successfully logging in your account, click [Exchange] on the top.
2. Tick the [Margin] option in the market display area to check and select trading pairs supported, click [Margin Trading] in the market selection area.
Step 2: Transfer assets to a margin account
Click [Transfer] on the margin trading page, select [From Spot Account to Margin Account], choose BCH coin type, set the [Amount] and click [Submit] to complete the transfer.
Step 3: Borrow BCH
Click [Borrow], select [BCH (Short Sell)], check [Automatic renewal] (enabled by default), enter the loan [Amount] and click [Confirm] to complete the loan.
Reminder: When the principal is 1 BCH, and you borrowed 3 BCH, which means the total is 4 BCH. That is, the principal is increased 4X margin.
Step 4: Sell BCH at a higher price. (Take a limit order as an example here)
Sell 4 BCH at a price of 250 USDT in the BCH/USDT margin trading market to get 1,000 USDT and complete the sell/short.
Step 5: Buy BCH at a lower price. (Take a limit order as an example here)
If the price of BCH goes down to 200 USDT, you can use 600 USDT to buy 3 BCH in the BCH/USDT margin trading market for repayment.
Step 6: Return the borrowed coins and interests
Click [Repay] on the margin trading page, select [BCH], enter [Paid amount] and click [Confirm] to complete the repayment.
Step 7: Transfer margin assets to spot account
Click [Transfer] on the margin trading page, select [From Margin Account to Spot Account], choose [BCH] coin type, set the transfer [Amount] and click [Submit] to complete the transfer.
Conclusion:
In the above example, if the price of BCH will go down from 250 USDT to 200 USDT and you have a principal of 1 BCH, then 3 BCH can be borrowed from the platform. You sell 4 BCH at the price of 250 USDT for getting 1,000 USDT. If the price of BCH go down to 200 USDT, and you use 600 USDT to buy 3 BCH for repayment.
The profit is: 1,000 USDT- 600 USDT- 250 USDT= 150 USDT. If you use your principal to make spot trading, you can only buy low and sell high.
Note: In order to simplify the calculation of the above process, the calculation of the borrowing fee is omitted.
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.