Profitable Margin Trading Method Using Binance || Sharing my knowledge with the Steemit community.

INTRODUCTION

God made life simple but human beings decided to make it difficult for themselves. There is actually no gain in hoarding knowledge. Hoarding knowledge can only make people dependent on the recipient if the knowledge is towards financial breakthrough. The one that hoards it won't even have peace of mind because for the many persons that depends on him for daily bread.

It has been very difficult being a Nigerian seeing the bad leaders that mismanaged the resources and had made the citizens of the country be in continual want. If the government won't help us, let us be of help to each other. Let us be our brothers' keeper so we can all have financial freedom.

On this note, I shall be sharing a knowledge I just acquired in my crypto journey few days ago. I hope it becomes useful to you.

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Source

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WHAT IS MARGIN TRADING?

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Margin trading is the type of trading that allows a trader to borrow asset based on the available assets and the leverage of the token to be traded. This borrowed assets are added to the initial assets of the trader are added together and are used for trades.
This helps increase profits instead of trading with only the initial assets of the trader. The traders assets serves as a collateral for the borrowed funds in this kind of trading.

Because margin trading uses leverage, once the token has been bought, a liquidation price is given. This means that if the price goes below the liquidation price, the initial assets of the trader is lost.

If a proper technical analysis of the market is taken before the trade is taken, there cannot be any liquidation rather, better profit is made using the borrowed assets and the initial assets or the trader all at once.

Note that, interest is incurred on hourly bases for this borrowed asset. On Binance, the interest per hour is 0.000833%. So for as long as it is borrowed, that is the percentage with which the interest is going to be calculated.

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TYPES OF MARGIN TRADING

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There are basically two types of margin trading. They are:

Isolated Margin Trading: In isolated margin trading, borrowed assets can only be used for trades on the currency or token pair for which they are borrowed. This means you can only use this type of trades for a particular currency pair. It offers a higher leverage (5x) which is associated with a higher risk of liquidation when compared to cross margin trading. The leverage also means a trader can only borrow four times of one's assets.

Cross Margin Trading: Cross margin trading is a type of margin trading that allows one to borrow assets that can be used to trade more than one currency pair. There is a lower risk of trading using cross margin because of the (3x) leverage that brings the liquidation price closer to the entry price. Cross margin lets a trader borrow up to two times of one's asset.

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ADVANTAGES OF MARGIN TRADING

• With margin trading, one can trade with even low capital or assets.
• Higher profit is guaranteed trading on margin

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RISK OF MARGIN TRADING

• Interests are collected for borrows fund.
• Just like spot trading, one can sell at loss.
• There is a high risk of losing all of one's asset due to liquidation.

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CONCLUSION

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I have been using Binance for two years and two months now. It was just of recent that I understood how margin trading really works. If you read carefully to what I have presented above, you will understand too. I didn't see any practical steps before I understood. Understand the write up above first and be on the look out for my next post. I shall share the practical steps to trade on Binance spots trading.

One last thing that you need to know about this type of trading is that just like spot trading, you can use it to hodl your coins. But this should be done after a good technical analysis of the market. But hodling here should be considered just for a short time.

Thank you!

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Cc:
@fredquantum
@kouba01
@pelon53
@wase1234