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Support CenterOperation guideHow to Use Margin Trading
How to Use Margin Trading
2022/03/04 20:23:17

Traders try to use margin trading to amplify their profits in spot trading, but it also comes with greater risk. Users can borrow tokens to increase their amount of capital and enjoy the potential of higher profits by using FAMEEX's Margin Trading. Users have to understand that margin trading is much riskier than regular spot trading. 


1. What is Margin Trading?


Margin trading is a method of trading or buying assets using funds provided by a third party, which means they are borrowing from the others. Margin trading allows traders to deploy a greater amount of capital, allowing them to leverage their positions. Margin trading amplifies trading results that traders can realize higher profits on successful trades. Users have to pay attention to the risk, because cryptocurrency is highly volatile and consider its own financial situation.


2. How to Calculate the Margin Trading Borrowing Rate?


Interest would be taken from the users who borrow tokens in margin trading. FAMEEX's margin trading interest rate is calculated on an hourly basis. If funds are borrowed for less than 1 hour, the interest will still be charged for an hour. Users have to repay the loan amount and interest at the same time when users decide not to borrow from FAMEEX.


3. How to Calculate the Risk Rate


Risk Rate will be calculated based on users’ leverage level and market price. 


Risk Rate = (Total Asset Value - Accrued Interest) / Outstanding Loan Amount X 100%

Total Asset Value = Sum of Assets Value in Margin Trading Account

Borrowing Assets = Sum of Outstanding Loan Value in Margin Trading Account

Accrued Interest = Every Transaction of Borrowing Token Amount X Hourly Rate X Duration of the Loan - Repaid Interest


4. Risk of Margin Trading


Margin trading allows users to amplify their profits with a relatively small amount of capital, but it may result in a great capital loss if the prediction goes wrong. Most traders may avoid using a high level of margin trading to prevent the liquidation of their positions.


5. How to lower the Risk Rate of Margin Trading?


(1) Reasonably control your levels of margin trading.


(2) Pay attention to the market changes, decisively stop loss or taking profits, and closing your positions needed.


(3) Deposit margin immediately, ensure the risk rate is higher than liquidation risk rate.


6. How to Use Margin Trading to Capture more Profits when the Price is Up?


For example, in BTC/USDT, if FAMEEX supports max. 5x leverage, and you predict that the price would go up to 20,000USDT from 10,000USDT. Your initial capital is 10,000USDT, then you are capable of borrowing max. 40,000USDT from FAMEEX to buy 5BTC at 10,000USDT with 50,000USDT in total. In this case, if the price actually goes up to 20,000USDT and you sell it immediately, your profit would be 5BTC X (20,000USDT - 10,000USDT) = 50,000USDT. On the contrary, you would only make 10,000USDT if you use your own money without using leverage. 5 times leverage would result in 5 times profit.


7. How to Make Profit through Short Selling by Using Margin Trading, when the Price Falls?


For example, in BTC/USDT, if FAMEEX supports max. 5x leverage, and you predict that the price would fall to 10,000USDT from 20,000USDT. With 10,000USDT( equivalent to 0.5BTC), you are capable of borrowing max. 2BTC and selling your 2.5BTC at 20,000USDT, then you can have 50,000USDT. You may buy back the 5BTC when the BTC price falls to 10,000USDT. Your profit would be 5BTC X (20,000USDT - 10,000USDT) = 50,000USDT. On the contrary, you would only make 10,000USDT if you use your own money without using leverage. 5 times leverage would result in 5 times profit.


8. Funds Transfer


Funds cannot be deposited into the margin account directly. You may transfer the funds from other accounts. If there is any outstanding loan, the max. amount can  be transferred as below:

(Total Assets Value - Accrued Interest) - Borrowing  Assets X 〔Times of Leverage / (Times of Leverage - 1)〕

After calculation, if the max. amount of the transferable fund is larger than the usable fund amount, then the max. amount of a transferable fund would be all the funds you can use for the account.

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