Leveraged trading allows you to amplify your market position by borrowing funds, potentially increasing both gains and losses. This guide walks you through the essentials of using margin borrowing effectively, using a practical example for clarity.
Getting Started with Margin Borrowing
To begin margin borrowing, navigate to the trading pair of your choice and switch to the margin trading interface. Before borrowing, ensure you transfer sufficient collateral from your spot account to your margin account. This collateral secures your loan and determines your borrowing capacity.
Once set up, you can choose to borrow either the base or quote asset. After borrowing, execute trades based on your market analysis—whether going long (buying) or short (selling). After closing your position, repay the borrowed amount along with any accrued interest.
Example Scenario: Trading with 5x Leverage
Assume you have 100 USDT in your margin account. With 5x leverage, you can borrow an additional 400 USDT worth of assets, giving you a total trading power of 500 USDT.
- Profitable Trade: If the asset’s price rises and your position grows to 550 USDT, repay the 400 USDT loan plus interest (e.g., 0.0003 BNB per hour at a 0.24% daily rate). Your net profit would be approximately 150 USDT minus interest.
- Unprofitable Trade: If the price drops and your position falls to 400 USDT, you still must repay the full 400 USDT plus interest, resulting in a net loss of nearly 100 USDT. Actual costs may vary based on holding period and interest rate fluctuations.
Note that participating in promotions, transferring assets, and placing orders can extend borrowing duration and increase interest costs. The example above uses simplified rates for demonstration.
Understanding Loan Terms and Interest
Interest Calculation
Interest is calculated based on the borrowing rate at the time of the loan and accrues hourly. For example, borrowing 3 BNB at a 0.24% daily rate results in:
Hourly Interest = (3 BNB × 0.24%) ÷ 24 = 0.0003 BNB
Rates can vary based on market conditions and user VIP tier. Higher tiers often enjoy preferential rates.
Repayment Priority
Loans are repaid in the order they were borrowed. Interest is deducted before principal. Once both are fully repaid, the loan is marked as “paid,” and interest stops accruing.
Loan Duration and Renewal
The default loan term is 10 days. If not repaid within this period, the loan automatically renews under the latest terms and rates. If renewal fails due to insufficient funds, a 24-hour grace period applies before forced repayment is initiated.
Notifications and Alerts
If auto-renewal is disabled, you’ll receive reminders 72, 24, 8, and 1 hour before expiry. For auto-renewed loans, you’ll be notified of any renewal failures or forced repayment risks.
Frequently Asked Questions
Q: How do I access margin trading?
A: Log into your account, select your desired trading pair, and switch to the margin trading tab. Ensure you have collateral in your margin account before borrowing.
Q: How is interest calculated on borrowed funds?
A: Interest accrues hourly based on real-time market rates. Your VIP level may qualify you for discounted rates.
Q: What happens if I can’t repay my loan on time?
A: Loans auto-renew by default. If renewal fails or your risk ratio falls below the liquidation threshold, your position may be force-liquidated.
Q: Can I repay my loan early?
A: Yes, early repayment is allowed. You’ll pay interest only for the duration you held the loan.
Q: Are there fees besides interest?
A: Interest is the primary cost, but ensure you understand potential trading fees and liquidation penalties.
Q: How does leverage affect risk?
A: Higher leverage amplifies both profits and losses. Always use risk management tools like stop-loss orders.
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Disclaimer: This article is for informational purposes only and is not investment advice. Leveraged trading carries significant risk; trade cautiously.