In essence, margin trading is trading using borrowed funds that belong to the broker and are guaranteed by collateral, margin. Potentially, you can dramatically increase your profits using this type of trading.
How does it work?
Let’s assume that you have 100 CUR on your balance and you use these funds to buy 1 COM. Some time down the road, the price of COM increases, so you sell it for, let’s say, 105 CUR. So in this example, your profit is 5 CUR.
Now let’s imagine that you borrow 400 CUR from the broker using your 100 CUR as collateral. You spend all your 500 CUR to buy 5 COM. In this case, if COM’s price increases by 5 CUR you will sell your 5 COM for 525 CUR and make a profit of 25 CUR - or five times more than in the first scenario, but with the same initial investment.
The ratio of borrowed funds to the investment amount is called leverage. In the second scenario above the leverage is 5:
|500 CUR : 100 CUR = 5|
Our exchange currently only offers a leverage of 5.
Margin trading is now available at Demo HitBTC.
Coming to the main platform soon!
How to start trading?
- Create collateral - add margin. The funds used for collateral will be reserved on your balance and won’t be available for trading.
- Make sure you have coins on the trading account, then press “Margin.”
- Press the “Add Margin” button on the top right.
- A pop-up will appear. Enter the amount for your collateral (margin) and press “Transfer.”
- Now you can see that your buying power was multiplied by 5. So in our example, we just borrowed 400 USDT with collateral of 100 USDT.
- Note that you can add more funds to your margin at any time.
- Place your first margin order. This will open a margin position for the chosen market - a set of your rights and obligations to the exchange (the broker).
Note: Before a first margin trade is filled, your margin position is zero and can be canceled at any time with no liability.
How to change the amount of collateral?
You can retrieve funds from your margin at any time.
- To retrieve margin, press “Add Margin” at the top right corner.
- Open the “Retrieve Margin” tab, enter an amount and press “Transfer.” These funds will become available on your trading account.
- Note that if you have an open position, you can retrieve only part of the margin. The system won’t allow you to transfer the Required Margin, which is needed to maintain your current position open.