Binance, one of the world’s largest cryptocurrency exchanges, offers margin trading with up to 3x leverage. In this article, we’re going to explain how Binance margin is calculated, and how you can use it to trade cryptocurrencies.
When you trade on margin, you’re essentially borrowing money from the exchange in order to trade. The amount of money that you can borrow is based on the amount of money that you have in your account, and the leverage that you’re using.
For example, if you have 1 BTC in your account, and you’re using 3x leverage, then you can borrow up to 2 BTC.
The amount of interest that you pay on your borrowed funds is known as the “financing rate”. The financing rate is calculated based on the daily interest rate of the currency that you’re borrowing, and it’s charged every 8 hours.
So, if you borrow 1 BTC at a 3% daily interest rate, then you will be charged 0.075 BTC every 8 hours (3%/4).
In order to calculate your margin, you simply need to multiply your borrowed funds by the leverage that you’re using. So, if you have 1 BTC in your account and you borrow 2 BTC at 3x leverage, then your margin will be 3 BTC.
It’s important to note that your margin is not static – it can change based on the price movements of the cryptocurrency that you’re trading. If the price of the cryptocurrency goes up, then your margin will increase; if the price goes down, then your margin will decrease.
For example, let’s say that you have 1 BTC in your account and you borrow 2 BTC at 3x leverage to buy ETH at $200 per ETH. Your total investment is 3 ETH (1 + 2), and your margin is 3 BTC.
If the price of ETH increases to $250 per ETH, then your investment is now worth 4 ETH (3 x $250), and your margin has increased to 4 BTC. However, if the price of ETH decreases to $150 per ETH, then your investment is now worth 2 ETH (3 x $150), and your margin has decreased to 2 BTC.
It’s important to keep an eye on your margin levels, because if your margin falls below a certain level (known as the “maintenance margin”), then your position will be liquidated and you will be forced to sell your cryptocurrency at whatever price it’s currently trading at.
The maintenance margin for most cryptocurrencies on Binance is 0.5%, so if yourmargin falls below 0.5% of the total value of your position (including borrowed funds), then your position will be liquidated. For example, if you have a 3 BTC position with 3x leverage (borrowing 6 BTC), then your maintenance margin would be 0.
045 BTC (0.5% of 9). If the price of Bitcoin falls and causes yourmargin to drop below 0.045 BTC, then your position will be liquidated and you will lose money.
In conclusion, Binance Margin is calculated by multiplying borrowed funds by leverage used. The financing rate is calculated daily based on interest rates charged every 8 hours.
It’s important to monitor Margin levels carefully as a drop below Maintenance Margin results in liquidation of positions held.