By leverage, we can increase profits in spot trading. Also, we have a greater risk of loss. Huobi.Pro Margin Trading is a financial derivative of crypto-crypto spot trading. Huobi.Pro users can increase your tradable balances by leverage so that they can gain higher profits from the investment. However, they must take risks as well. I am going to elaborate on Huobi.Pro Margin Trading in the following section.
1. What is Margin Trading?
Margin Trading refers to the practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan from the broker. Since such use of financial leverage can potentially magnify gains but could also saddle the trader with devastating losses, leverage has the well-deserved reputation of being a double-edged sword.
2. See a cryptocurrency in a bullish trend? How can I double the profits using leverage?
Take BTC/USDT as an example. Exchange supports three times leverage. When you believe that BTC price will rise from 10,000 USDT to 20,000 USDT, if you want to invest 10,000 USDT (or 0.5 BTC) as the maintenance margin, you can loan 20,000 USDT maximum from the exchange. Then buy 3 BTC at the price of 10,000 USDT per BTC, and sell them at the price of 20,000 USDT per BTC. You will gain profits of 20,000-10,000 = 30,000 USDT. If you only trade with your funds, you will not be able to gain the profits. Using three times leverage will amplify your profits to 3 times.
3. See a cryptocurrency in a bearish trend? How can I double the profits using leverage?
Take BTC/USDT as an example. Exchange supports three times leverage. When you believe that BTC price will drop from 20,000 USDT to 10,000 USDT, if you want to invest 10,000 USDT (or 0.5 BTC) as maintenance margin, you can loan 1 BTC from the exchange. Then sell 1 BTC at the price of 20,000 USDT and buy 1 BTC at the price of 10,000 USDT. You will gain profits of 10,000 USDT. If you only trade with your funds, you will not be able to gain the profits.
4. What is the interest rate of Margin Trading?
Daily rate of loaning USDT is 0.1%. Daily rate of loaning BCC, ETH, LTC, ETC, DASH, XRP, EOS, OMG, ZEC is 0.02%. This interest starts from the moment you loan. One day/24 hours is considered as a unit. Any time less than 24 hours will be considered as 24 hours. When you repay the loan, you also need to repay the interest.
5. What is the risk of Margin Trading?
As mentioned earlier, margin trading can amplify gains as well as losses. If the cryptocurrency you bought suddenly has a sharp decline, you will face the risks of larger losses. So ordinary investors should avoid high leverage trading to avoid liquidation or debt.
6. How can I reduce the risk rate of Margin?
(1) Use leverage times reasonably, and control your positions.
(2) Keep the loss and profit in a reasonable range, and close your positions spontaneously
(3) Add margin in time and make sure that the rate of Margin Balance and Wallet Balance is over 110%.
Here are the related functions of Margin Trading:
1. Margin Account
Each Margin Trading pair has a Margin Account. For example, ETH/BTC pair has an ETH/BTC Margin Account (including ETH and BTC subaccounts). Huobi.Pro users can transfer ETH and BTC from an Exchange Account to a Margin Account. An ETH/BTC Margin Account can loan ETH and BTC.
2. Fund Transfer
Huobi.Pro users temporarily can not directly deposit into a Margin Account. But they can use the Transfer function to transfer funds from an Exchange Account to Margin Account. When users have no loans, they can transfer the part of funds whose risk rate is over 200% to Exchange Account. “Margin Account” page is shown below:
“Transfer” page is shown below:
Funds in a Margin Account can be traded in crypto-crypto trading. “Trend” in Margin Trading and that in crypto-crypto Exchange are the same.
Huobi.Pro users can enter Margin Management, choose Margin Account and apply for loans. The amount of currency that users can loan depends on the amount of maintenance margin and leverage times. Maximum Amount of Loan = Estimated Net Value (BTC) x (Times-1) – Loaned Amount. For example, if Huobi.Pro supports three times leverage maximum, users can loan up to 2 times amount the maintenance amount.
How is Risk Rate calculated?
The system will monitor the Risk Rate of users’ Margin Account. Risk Rate = (Wallet Balance/Loaned Amount x 100%)
P.S.: “Wallet Balance” means the total equity held in the Margin Account and is estimated in BTC.
4. Loan Repay
When Huobi.Pro users repay loans, they should repay each loan position respectively, and they must repay in the currency they loan. Repay Amount = Loaned Amount+ Interest. You can choose to repay all or part of the loans. If you repay part of the loans, you should repay interest first, then repay the loaned amount.
Interest formula: Interest = Loaned Amount x Rate x Days. One day/24 hours is considered as a unit. Any time less than 24 hours will be considered as one day.