How to Use Margin Trading?

In spot trading, margin trading can amplify returns but also expose traders to greater potential losses.

FameEX allows users to borrow funds to open larger positions in tradable assets through margin trading. While this increases the potential for higher returns, it also involves higher risks. Users should ensure they fully understand margin trading before participating.

1. What Is Margin Trading?

Margin trading involves using borrowed funds to trade assets with a larger position than your actual capital allows. This increases the potential for profits but also magnifies possible losses. Given the high volatility of digital assets, please understand the associated risks and use margin trading cautiously.

2. How Are Margin Lending Rates Calculated?

When borrowing funds for margin trading, interest is charged on the borrowed amount. FameEX calculates interest using an hourly service rate. Interest begins accruing immediately upon borrowing and is charged once at that moment, then again every natural hour thereafter. If borrowing crosses into the next full hour, it counts as two hours. Upon repayment, both the borrowed funds and accrued interest must be returned.

3. How Is the Risk Rate Calculated?

FameEX calculates your margin account’s risk rate based on your assets and liabilities under current market conditions:

Risk Rate = (Total Assets - Unpaid Interest) / Outstanding Borrowed Amount × 100%

Total Assets: Total value of all assets in your margin account

Borrowed Assets: Total amount of borrowed funds not yet repaid

Unpaid Interest =

(Borrowed amount × Hourly interest rate × Duration since borrowing) - Repaid interest

4. Risk of Margin Trading

Margin trading allows users to control larger positions with limited capital, potentially boosting returns. However, if market trends are misjudged, losses are also magnified. As such, regular traders should avoid excessive margin use to reduce the risk of margin calls or account liquidation.

5. How to Reduce Margin Trading Risk?

5.1 Borrow responsibly and avoid maximizing your margin ratio

5.2 Track market trends, set appropriate stop-loss and take-profit points, and close positions promptly when needed

5.3 Add margin in a timely manner to maintain a risk rate above the margin call threshold

6. Go Long with Margin Trading (How to Profit When the Market Rises?)

Take BTC/USDT as an example. If FameEX supports up to 5X margin, and you believe BTC will rise from 10,000 USDT to 20,000 USDT, you can use your 10,000 USDT as collateral and borrow 40,000 USDT. This gives you 50,000 USDT to buy 5 BTC at 10,000 USDT each.

When BTC reaches 20,000 USDT, you sell the 5 BTC and earn:

Profit = 5 BTC × (20,000 - 10,000) = 50,000 USDT

Without using margin, you’d only profit 10,000 USDT. With the 5X margin, your returns are increased fivefold.

7. Go Short with Margin Trading (How to Profit When the Market Falls?)

Take BTC/USDT as an example. If BTC is at 20,000 USDT and you expect it to drop to 10,000 USDT, you use your 10,000 USDT (equal to 0.5 BTC) as collateral and borrow 2 BTC, giving you a total of 2.5 BTC to sell short.

You sell 2.5 BTC at 20,000 USDT, receiving 50,000 USDT. When the price falls to 10,000 USDT, you buy back 5 BTC for 50,000 USDT.

Profit = 5 BTC × (20,000 - 10,000) = 50,000 USDT

Without margin, your profit would be limited to 10,000 USDT. With 5X margin, it is amplified fivefold.

8. Fund Transfer

Direct deposits into margin accounts are not currently supported on FameEX. To use margin trading, transfer funds from another account (e.g., spot account) to your margin account.

If you have borrowed funds, the maximum amount that can be transferred out is:

Max Transferable = (Total Assets - Unpaid Interest) - (Borrowed Amount × [Margin Ratio / (Margin Ratio - 1)])

If this calculated amount exceeds your available assets, the maximum transferable amount is limited to what is actually available in your account.