The largest centralized cryptocurrency exchange, Binance, attracts domestic traders not only with its Russian-language interface, convenient, understandable navigation, and a familiar trading terminal with a familiar set of technical analysis tools. Binance is ahead of its competitors in terms of daily trading volume and liquidity ratio.
There are more than 400 digital assets listed. Supports over 40 fiat currencies, including the Russian ruble. Loyal tariff plans are available - for example, on the spot market the commission for taker/maker is 0.075%.
By using the trading platform's native coin (BNB), you can reduce your pricing plan by 25%. The indicated other factors arouse keen interest in the trading platform among domestic speculators, making the question of how to trade on Binance relevant.
What is margin trading
Margin trading is a method of trading assets using funds provided by a third party. Compared to regular trading accounts, margin accounts allow traders to access larger amounts of capital while allowing them to leverage their positions. Essentially, margin trading improves trading results so that traders can make greater profits from successful trades. This ability to enhance trading results makes margin trading particularly popular in low volatility markets, especially the international Forex market. However, margin trading is also used in the stock, commodity and cryptocurrency markets. In traditional markets, borrowed funds are usually provided by an investment broker. However, when trading cryptocurrency, funds are often provided by other traders who receive interest based on market demand for margin funds. Although less common, some cryptocurrency exchanges also provide margin funds to their users.
Longs and shorts: what's the difference?
In the previous article about the spot wallet, I already talked about the main types of trading. Now we go down the hierarchy: to different transactions.
Spot Balance is the main wallet on Binance. If you deposit regular money or cryptocurrency, they will go to spot.
Long: bet on an uptrend
In futures trading, long (from the English long - long) orders are bets on an increase in the exchange rate. If you bought a token for $60 and sold it for $100, then $40 is your profit.
Let’s say Ivan bought Bitcoin on June 9 at $52,633. The currency is currently worth $66,723. He entered into a long order, which means the profit is the difference between the buy and sell rates. That is $14,090.
Long positions are mainly used by beginners. Spot trades are only upside, and novice traders do not know how to use a margin and futures account.
Short orders: for dummies
Another type of transaction is short (from the English short - short). They bet that the token will fall. We borrow crypto from the exchange when the market is at its peak and immediately sell it.
Let's say you sold 10 coins for $50 each. A week later, the company was sanctioned by the European Union, and its cryptocurrency fell to $40 per share. Now, with the $500 you received from the sale, you buy the borrowed 10 coins for $400, and the remaining 100 are your profit.
Choose long for bullish trades and short for bearish trades. The effectiveness of each depends on the market trend.
Isolated Margin User Guide (Internet)
Trade
1.1 Login. Log in to the main Binance website at https://www.binance.com/. From the menu at the top of the page, select [Spot] - [Margin] to enter the margin trading interface. Click [Isolated] in the menu on the right and select the desired trading pair (for example, ZRXUSDT).
Note. To learn more about margin trading, you can refer to the [Margin Trading Steps] or [Margin Tutorial] videos located in the middle of the trading interface page.
1.2 Activation In the trading interface, confirm the trading pair and margin level, read the Terms of Service, then click [Open Now].
1.3. Translation. In the trading interface, click [Transfer] on the right side of the page.
In the Transfer pop-up, confirm that you are transferring from your [spot wallet] to an isolated margin account, such as . Select [Coin], enter [Amount] and click [Confirm].
Note : Press ? to switch between [Isolated ZILBTC] and [Spot Wallet].
1.4 Borrowing In the trading interface, click [Borrow] on the right side of the page.
In the Borrow/Repay pop-up window, select [Coin] and enter [Amount], then click [Confirm Borrowing].
1.5 Trading In the trading interface, select the order type by clicking [Limit], [Market], [OSO] or [Stop Limit]. Select trading mode [Normal]; enter the [Price] and [Amount] you want to buy, then click [Buy ZRX].
Note : In the trading interface, you can combine borrowing + trading or trading + redemption by selecting [Borrowing] or [Redemption] mode when you or .
1.6 Repayment After making a profit, it is time to pay off the debt (borrowed amount + interest). In the trading interface, as before, click [Borrow] on the right side of the page.
In the "Borrowing/Repayment" pop-up window, go to the [Repayment] tab, select [Coin] and enter the [Amount] you want to repay and click [Confirm Repayment].
Wallet
Go to the Margin Account interface by going to [Wallet] - [Margin Wallet] from the drop-down menu at the top of the page.
Select [Isolated Margin] and enter [Coin] (eg ZRX) to filter trading pairs. Here you can view your assets and liabilities.
Note : In the Margin Account interface, you can also view your assets, liabilities and profits in the [Positions] section.
Orders
Enter the margin order interface via [Orders] - [Margin Order] in the drop-down menu at the top of the page.
Select [Isolated Margin] to view your order history. You can filter trading pairs by [Date], [Pair] (for example, ZRXUSDT) and [Side].
Note : In the margin orders interface, you can also view your [Open Orders], [Trading History], [Borrowings], [Repayments], [Transfers], [Interest], [Margin Requirements] and [Liquidation History], etc. .
Register a Binance AccountOpen a Demo Account
Trading example
Alice believes that the price of BNB will rise, so she wants to open a leveraged long position on BNB. To do this, she first transfers funds to her margin wallet and then borrows BTC. She then uses the borrowed BTC to purchase BNB. If the price of BNB rises as Alice expected, she can sell her assets and repay the borrowed BTC along with the corresponding interest. Any remainder of this trade will represent its profit.
However, margin trading can magnify both profits and losses. So if the market moves against Alice's position, her losses will be greater than if she used exchange trading.
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Margin Trading Guide
Four steps for margin trading:
Step 1: Enabling Margin Account Select [Trading] → [Basic] from the navigation bar, select the [Margin] tab for any margin trading pair, then click [Open Margin Account].mceclip0.png
Enable account margin by clicking [I understand] after reading the Margin Account Agreement.
Step 2: Transfer to Select [Transfer] to transfer from the spot wallet to the margin wallet.
Select the coin you want to transfer, enter the amount and click [Confirm Transfer] to transfer.
Step 3: Borrow/Swap Select [Borrow] to perform a buy on margin or sell on margin.
Step 4: Redemption/Exchange Select [Redeem] to complete a margin buy or margin sale.
Market selection
The first step is to start trading directly. Spot, futures markets and P2P platform are available to all platform participants. For OTC mode, the trader must meet certain requirements, in particular, have a verified account of the second level or higher, and the order amount must exceed 20 BTC. Within the framework of it, it is possible to conclude large over-the-counter agreements with the participation of a third party.
Spot trading on Binance is suitable for those who prefer instant transactions. To switch to this mode, select the “Spot Markets” tab. If you want to use futures contracts, you need to refer to the “Futures Markets” tab.
It is worth noting that you can only trade futures on Binance from a special futures account in a separate terminal.
How to enable a margin account on Binance
To enable a margin account on Binance, log into your Binance account, click [Wallet] - [Margin Wallet].
To ensure the security of your account, you must enable at least one two-factor authentication (2FA) method.
Notes：
- At least 10 sub-accounts can open a margin account
- Users can only borrow up to one BTC valuation asset with 5X leverage.
- Sub-accounts cannot adjust margin leverage up to 5X.
Binance Margin Level and Margin Requirement
Margin trading allows you to add leverage to your positions to increase your potential earnings and profits. Binance uses your margin level to evaluate the risk level of your margin account.
Cross margin level
1.1 Users participating in margin borrowing may use the net assets in their cross-margined Binance accounts as collateral, and digital assets in any other accounts are not included in the margin for cross-margin trading.
1.2 Cross Margin Account Margin Level = Total Asset Value of Cross Margin Account / (Total Liabilities + Interest Outstanding), where:
Cross Margin Account Total Asset Value = the current total market value of all digital assets in the cross margin account.
Total Liabilities = the current total market value of all outstanding margin loans in the cross-margin account.
Interest outstanding = amount of each margin loan * number of hours as loan time at time of calculation * hourly interest rate - retention / interest paid.
1.3 Margin level and related transactions
- Leverage 3x
When your margin level ＞ 2, you can trade, borrow and transfer assets to the exchange wallet;
When 1.5＜margin level ≤2, you can trade and borrow, but cannot transfer funds from your margin account;
When 1.3＜margin level ≤1.5, you can trade, but cannot borrow or transfer funds from your margin account;
When 1.1＜margin level ≤1.3, our system will initiate a margin call and you will receive a notification by mail, SMS and website to inform you to add additional collateral (transfer more collateral assets) to avoid liquidation. After the first notification, the user will receive a notification every 24 natural hours.
When the margin level is ≤1.1, our system will trigger the liquidation mechanism and all assets will be liquidated to pay interest and loan. The system will send you a notification by mail, SMS and website to inform you about this.
- Leverage 5x (only supported on master account)
When your margin level is 2, you can trade, borrow and transfer assets to the spot wallet;
When 1.25＜margin level ≤2, you can trade and borrow, but cannot transfer funds from your margin account to your exchange wallet;
When 1.15＜margin level ≤1.25, you can trade, but cannot borrow or transfer funds from your margin account to your exchange wallet;
When 1.05＜margin level ≤1.15, our system will initiate a margin call and you will receive a notification by mail, SMS and website to inform you to add additional collateral (transfer more collateral assets) to avoid liquidation. After the first notification, the user will receive a notification every 24 natural hours.
When the margin level is ≤1.05, our system will trigger the liquidation mechanism and all assets will be liquidated to pay interest and loan. The system will send you a notification by mail, SMS and website to inform you about this.
Isolated Margin Level
2.1 Net assets in a user's Isolated Margin Account can only be used as collateral for the relevant account, and assets in the user's other accounts (cross-margin account or other isolated accounts) cannot be calculated as collateral for it.
2.2 Isolated Account Margin Level = Total Value of Isolated Account Assets / (Total Value of Liabilities + Unpaid Interest)
Among them, total asset value = total value of underlying assets + nominal assets in current segregated account.
Total Liabilities = The total value of assets that were borrowed but not returned to the current isolated account.
Unpaid interest = (amount of each loan asset * duration of loan * hourly interest rate) - interest paid
2.3 Margin level and operations
At Margin Level (ML) 2, users can trade, borrow, and excess assets in the account can also be transferred to other trading accounts. But ML still needs to be equal to or greater than 2 after transfer to ensure normal asset transfer functions.
- Initial Ratio (IR)
The IR is the initial risk rate after the user borrows funds, and there are different IRs depending on the leverage. For example, the IR would be 1.5 at 3x leverage with full borrowing, the IR would be 1.25 at 5x leverage with full borrowing, and the IR would be 1.11 at 10x leverage with full borrowing.
- Margin Requirement Ratio (MCR)
When MCR MCR will differ depending on leverage. For example, the MCR for 3x leverage is 1.35, for 5x leverage is 1.18, and for 10x leverage is 1.09.
- Liquidation Ratio (LR)
When LR When ML ≤ LR, the system will perform the liquidation process. The assets in the account will be forced to be sold to repay the loan. At the same time, users will receive notifications via email, SMS and reminders on the website.
LR will vary depending on leverage. For example, the LR for 3x leverage is 1.18, for 5x leverage is 1.15, and for 10x leverage is 1.05.
Shoulder
Leverage, or leverage, is an increase in the size of a position due to borrowed funds provided by the exchange to the trader at interest. Leverage is indicated by a multiplier, for example 10x means that the amount of funds used when opening can be 10 times greater than the trader’s available funds. That is, another $900 in credit will be added to the $100 used, so that the final volume is $100 x 10 = $1000. This formula is simple and does not require the Binance calculator, although it does have a calculation option. Since the position is opened on an asset, the trader may need to calculate its size in the asset, at the current or non-round price (which is discussed in the examples), such as $11,256. Example of calculating position volume 20x with $500 balance:
Maximum opening calculation with 20x leverage
With a balance of 500, you can open a position of 1 BTC.
The main advantage of trading with leverage is, of course, the ability to trade with a small balance, while receiving profits that are multiplied by leverage.
Using the Binance calculator, let's calculate the possible profit when the price of Bitcoin changes from $10,000 to $11,000 for a long position with 20x leverage:
Profit at 20x leverage
When opening a position long 1 BTC 20x, the final profit (PNL) will be $1000 on the $500 invested. That is, the profitability (ROE) will be equal to 200%.
The calculator also has the ability to calculate the exit price to achieve the desired level of ROE. The example below shows the calculation of the exit price (target price) for ROE 30% with 20x leverage:
Calculating Target Price on Binance Futures Calculator
Thus, when using 20x leverage, a price movement from $10,000 to $10,150 (that is, its change by 1.5%) is enough to make a profit of 30% of the invested funds.
We recommend that you study the further text very carefully, since the safety of the trader’s funds directly depends on understanding the aspects of margin and liquidation price.
Margin trading index price
The margin trading price index is calculated in the same way as the futures contract price index. A price index is a collection of prices on major spot market exchanges, weighted by their relative volume. The margin trading index is based on market data from Huobi, OKex, Bittrex, HitBTC, Gate.io, Bitmax, Poloniex, FTX and MXC. We also take additional protective measures to avoid poor market performance caused by spot market price disruptions and connectivity issues. These protective measures are as follows:
- Single Source Price Deviation: When the latest price of a particular exchange deviates by more than 5% from the average price of all sources, that exchange's price weight will be temporarily set to zero.
- Variation from multiple price sources: If the latest price of more than 1 exchange shows a deviation of more than 5%, the median price of all sources will be used as the index value, rather than the weighted average.
- Exchange connection problem : If we cannot access the data feed of an exchange whose trades have been updated in the last 10 seconds, we will consider the latest and most recent price data available to calculate the price index.
- If an exchange does not update transaction data within 10 seconds, the weight of that exchange will be set to zero when calculating the weighted average.
- Last Transaction Price Protection: When the "Price Index" and "Marked Price" matching system fails to provide a stable and reliable source of reference data, the index will be affected for contracts with a single price index (i.e., the Price Index will not change). In this case, we use our Last Transaction Protection mechanism to update the Mark Price until the system returns to normal. “Last Transaction Price Protection” is a mechanism that temporarily switches the marking price according to the last transaction price of the contract, which is used to calculate the unrealized profit and loss and liquidation requirement level. This mechanism helps prevent unnecessary liquidation.
Notes
- Cross rate: for indices without direct quotations, the cross rate is calculated as a composite price index. For example, when combining LINK/USDT and BTC/USDT to calculate LINK/BTC.
- Binance will update the price index components from time to time.
FAQ for beginners
We have prepared answers to the questions that arose in your mind after this article.
What's the best way to trade long?
If you are a beginner, then enter long orders. If you make an incorrect forecast, you will not owe money to the exchange.
Study the market before opening an order. To do this, you need to understand what a “Bull” and “Bear” market is and what trends there are.
What rate should I short with?
It is more difficult with short positions than with long ones. You won't be able to wait for growth while wearing shorts.
To make money, analyze the company and predict the fall (scalping). It can happen due to the dismissal of employees or any other scandal.
Also follow three rules:
- Don't bet everything.
- Don't take risks.
- Calculate interest, fees and expenses in advance.
Without them, the account will go into negative territory and liquidation will occur.
The ratio of the number of longs and shorts at the same time
Yes. The platform does not limit the user in the number of active transactions.
Longs VS shorts: what to choose for a beginner
If a beginner chooses according to the “longs versus shorts” rule, then he needs to learn financing and hedging strategies. Such guidelines will help in concluding open-ended contracts. Use them as step-by-step instructions.
How to compare returns
To compare income, calculate PNL for each period, add them to the table and compare profits by month.
