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Crypto Basic Trading 101: Understanding Cross Margin and Isolated Margin Trading.

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Written by   121
1 month ago

Risk warning: Crypto trading is pretty risky especially for beginners. It is highly recommend to study first the concept of crypto trading along with its pros and cons. Make sure to gain enough knowledge before jumping in the risky game of cryptocurrency.

Overview

  • What is Binance Exchange?

  • What is Margin Trading?

  • What is Cross Margin Trading?

  • What is Isolated Margin Trading?

Introduction.

Crypto trading is one of the most profitable yet the riskiest way to gain money. Crypto trading is simply buying and selling different kinds of cryptocurrencies and gain profit from it.

What is Binance Exchange?

Binance is currently one of the top exchanges yet the hottest crypto exchange in the crypto space now where you can trade, buy and sell hundreds of cryptocurrencies.

For more information about Binance, visit here: https://www.binance.com/en/about or https://en.m.wikipedia.org/wiki/Binance.

Understanding Margin Trading.

Margin Trading is a concept of borrowing an asset out from the asset that you have collateralized.

Think of it like a loan in the real world, but the difference is that you can use the collateralized asset/amount for trading.

Example;

You wanted to buy a certain cryptocurrency that you think can be profitable in the short term but you only have $100 USDT in your account. Now, in your Binance Margin account, Binance will allow you to borrow an asset 3x from your collateral.

Therefore, with your $100 USDT, you can borrow $200 USDT in the platform making you have a total of $300 USDT for trading.

With Margin Trading, there are two types of it:

  • Cross and Isolated Margin Mode.

The Cross and Isolated Margin Mode.

In the examples below, I will be using Future margin trading for easier understanding.

With Cross Margin Mode, all of your positions or trades will be allowed to use your total assets in your Margin account in order for your position to be further away from the liquidation price.

Let's have an example of it;

Let's say that you have $10 USDT in your account and you want to open a long position for BTC with just $1 USDT. Now, because you are in a Cross mode, your liquidation price could be very far away from your position. However, because you are in a Cross mode, when the price doesn't seem to be going in your way and reaches your liquidation price, your position will be liquidated and the platform will take your $10 USDT in your account.

But things are different with Isolated mode. In this mode, your position will only be restricted depending on what amount you inputted in your position.

Here's an example;

You have $10 USDT in your account and you want to make a long position for $1 USDT. Since you are in an Isolated mode, your liquidation price cannot be further away from position compared to Cross mode. But, whenever your position doesn't looking good and reaches your liquidation price, since you are in an Isolated mode with $1 USDT margin, your $1 USDT position will only be liquidated and not the total amount of your account.

How Does This Apply In Your Real Margin Account?

I will put this as simple as I can with an example.

In your Margin account using Cross mode, you borrowed $200 USDT with a collateral of $100 USDT.

Then, with your borrowed amount, you buy $100 USDT of BCH and $100 USDT of BTC.

Now, supposing that BTC and BCH dropped it's value of -50% and -25% respectively (just an example) from the price you bought them, and you closed your positions and want to repay the borrowed amount because you wouldn't want your position to get liquidated and loss everything in your account.

But since you have a loss positions from the two worth -25 USDT of BCH and -50 USDT of BTC, you will be paying the platform worth $200 USDT + 75 USDT leaving you only $25 USDT from your initial amount of $100 USDT. That could hurt.

Final Say.

Margin trading is very risky because this could wreck your account and lost your asset. People who uses this type of trading are usually advance or experienced trader who knows how to take advantage of market. So don't be reckless of jumping into it without having any basic knowledge about it.

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Written by   121
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Comments

Mas prefer ko isolated hahaha hirap na baka maubos pera ko😆

$ 0.00
1 month ago

Kaso delikado yan hahaha isang stop loss hunt lang ng mga whales liquidated agad. Pero better na din to protect the funds.

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1 month ago

Bihira lang naman ako mag-futures hahaha di kasi akk swerte, mali lagi newbielysis ko.

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1 month ago

Ako na naubusan ng $200 dahil umasa lnag sa mga fake signal sa telegram: 👁️👄👁️

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1 month ago

Hahaha umasa din ako sa mga ganyan pero nakakagain din ng unti.

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1 month ago

Looking forward for an article : How to unlearn futures and margin trading. Because.... hahahaha you know naaa

Pero nice summing this up! Level up ka naaa! Pabalatoooo hahahah 🤣

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1 month ago

That's simple. Long press your Binance app and click uninstall 😂

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1 month ago

Pano yan lods pag lumagpas yung talo mo sa initial amount mo na $100 magkakautang ka ba sa Binance?

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User's avatar Oz_
1 month ago

Hindi lods. Liquidated kana nyan. Talo kana. Risky talaga yan lods kaya mas mabuti iwas nalang sa ganyan kung di pa masyado maalam. Ako nga minsan lang mag ganyan

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1 month ago

Iwas nga lang muna, tsaka na ako mag future trade kapag maging expert na ako sa demo trading with 100% win rate HAHAHAH😂

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User's avatar Oz_
1 month ago

Hahaha dun sa stormgain meron 😂

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1 month ago

Future is not in my dictionary coz it's risky🤣🤣

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1 month ago

I only do future trading sometime. Yeah, me too, I have no future in future trading 😂

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1 month ago