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Learn all about margin and bitcoin derivatives on Binance Exchange

Margin trading and derivatives of Bitcoin and other cryptocurrencies are two instruments available on Binance Exchange. Here you can trade with up to 10x leverage and perpetual cryptocurrency futures contractsalong with all the trading tools that the platform makes available to you.

Leverage trading or margin trading within Binance Exchange is divided into 2 types: Cross and Insolate. with pronounced differences in the way of working. Margin Cross offers leverage up to 5x, while Insolate offers up to 10x the invested amount. These leverages can vary depending on the property.

On the other hand, among the derivatives offered by Binance are futures on a permanent contract, with leverage reaching 120x; and leveraged tokens, the latter being managed within the platform under the concept of ETFs (traded funds).

In previous articles we have already explored what is Binance Exchange? and how to use it for conventional trading by doing spot trading, as it is commonly called. We recommend that you read both articles before proceeding, as there are some things you will need to know. For example, how to make deposits to your Binance wallet to be able to do margin trading and derivatives of bitcoin and other cryptocurrencies on Binance Exchange.

What is margin trading on Binance?

Margin trading is a way of doing business on the stock market, in this case cryptocurrencies. Inside that you put part of the transaction amount (margin) and the broker, in this case Binance Exchange, It lends you a certain amount so that you can open accounts. This in turn translates into more profits (or losses) with larger positions but with less money. It is basically margin trading.

In trading jargon, margin or leverage is usually denoted by the nomenclature “Nx”, where N is a number. So “10x” means that for every unit you place, the broker will lend you 10 times more. This usually varies and on Binance Exchange it is possible to modify the level of leverage you want to work with.

Within Binance Exchange, you can find two types of margin trading for Bitcoins and other cryptocurrencies, namely Cross and Insolate. Although they work in the same way, they have differences between them.

Differences between Margin Cross and Insolate on Binance Exchange

The first difference, and perhaps the most noticeable, is the leverage levels each offers, with the Insolate managing to reach 10x while the Cross reaches 5x.

Another difference between these two types of margin trading is the way the accounts are managed, hence their names. For Cross, you work with one account or wallet, where the leverage level is calculated by averaging all the Margin Cross orders you open. On the other hand, in the case of Insolate, each account or portfolio is individual; That is, you will need to transfer funds from your main wallet to each Insolate wallet of the pairs you want to trade with this bullion.

How does margin trading work on Binance Exchange?

We previously explained how margin trading generally works, where you put in part of the order size and the broker lends you the rest, so you can open larger orders. However, margin of Binance It is managed according to the concept of credit at the time of business.

Credits for Margin Trading on Binance Exchange

Loans within Binance are made within your margin portfolio, either Cross or Insolate, where the amount requested will depend on the amount of cryptocurrency you deposit and the level of leverage that said crypto asset allows for the type of margin it operates with.

As for the assets you can borrow, it depends on the type of margin you make. If this is the case with Cross Margin, you can deposit and borrow any cryptocurrency available there. This is due to the very nature of that type of trading where business is done as a whole. On the other hand, in the case of Insolat If you deposit, for example, within the USDT/BTC pair, you will only be able to pledge and request loans in USDT or BTC.

On the other hand, loan repayment can occur in two ways. The first is debt management directly from the margin portfolio. The second is to open an account opposite to the one you opened at the time of using the leverage (loan) for payment. For example, if you opened a buy order for 1 BTC with a certain level of leverage, to pay the said debt, you will need to open a sell order for 1 BTC, but check the Pay option. You will see how this happens later.

Risks of Margin Trading on Binance Exchange

Margin is a type of trading that carries a number of additional risks than traditional trading. The first of these, and the most dangerous, is that just as you can make larger profits by trading larger orders, you can create large losses in an unexpected market crash. That’s because the money you put up as collateral is basically what’s at risk.because when the market goes down and the collateral is unable to support the loan, the position is closed, they liquidate all your funds and return the loan.

This margin level indicator lets you know the risk of your position being liquidated. Source: Binance.

The risk within the margin can also increase due to the level of leverage. Within Binance Exchange, When your collateral is below 1.3 margin levels, you will receive a margin call or margin callwhich is a notification telling you that you need to invest more escrow funds to avoid a forced closure.

How to Margin Trade on Binance Exchange?

To begin with, two things are needed. First, you need to open an account on Binance (no need to go through the identity verification process) and deposit money into your Spot account. If you want to learn how to deposit funds, we leave you this link. The next thing you need to do is open your margin account, either Cross or Insolate.

Open a Cross Margin account on Binance

In cross-margining, you will only need to open one account or portfolio because, as we have already explained, the leverage levels are managed as a whole. The first thing you need to do is go to the “Wallet” section in the top menu and then select Margin Wallet.

You can also open a Cross Margin account when opening an account with this type of leverage. Source: Binance.

Once you’re in, make sure the Cross option is checked in the top window. Now you should carefully read a little warning about the risks you have when trading in the cryptocurrency markets with the help of leverage. Once you’ve read it, you can select the Open Now option.

The Cross Margin wallet handles over 30 different cryptocurrencies. Source: Binance.

At this point, you already have your Cross Margin portfolio ready, now you will need to transfer the funds from your Spot wallet. To do this, you need to locate the cryptocurrency to make the payment and select the Transfer option. From here you will only need to select the amount to pay. This transaction is done immediately and you can start margin trading.

The spot wallet is the only asset you will need to deposit into your margin portfolio. Source: Binance.

Open an Insolate Margin account on Binance

The margin wallet has two options: crossed and isolated. Source: Binance.

In that case, you will have to select the “isolated” option within the Margin portfolio, where it will show you a list of active cryptocurrency pairs for this type of margin trading. In this section, wallets are activated individually from the Enable option. Once available, you will be able to transfer your funds from your Spot wallet as well as apply for credit for this trading pair.

How to order with Cross or Insolate margin on Binance Exchange?

The first thing will be to go to the Trade section on the top menu and select the Margin option.

Margin trading option is also available under intermediate and advanced trading options. Source: Binance.

Within the Binance cryptocurrency margin trading interface, you must first check if the Cruzado or Insolate option is checked. Within this option you will be able to see the amount of leverage available, which in this case is 3x and 10x respectively.

Only one type of lever is available on some pairs.

The next step is ordering. First of all, since in our case we are not looking for a loan within the Margin portfolio, You must check the loan box for the request to be effective and to be ordered with leverage.

After that, you have to order whatever you want. After all the information is correct, you must select Sell or Buy for the order to be effective and thus place a successful order.

How to pay margin loans on Binance Exchange?

Suppose you opened an account for 5 BTC with 5x leverage, where your money is equal to 1 BTC in USDT, and the purchase price was 10,000 USDT. Let’s imagine that BTC is now over 11,000 USDT, making our 5 BTC order 55,000 USDT. So you want to close it and pay off the loan, how do you do that?

First, consider what type of order you opened, which in the case of the example was a purchase. To pay the loan, you have to create an order of the opposite type Market (which is executed immediately), and in this case it would be a sale, but with the fact that you have to check the Pay option and set the total amount of the order you opened earlier. This way you would pay 4 BTC in credits, plus fees, and get the equivalent of 1.5 BTC in USDT.

What fees does Binance Exchange charge for cryptocurrency margin trading?

The Binance Exchange fee table is quite complex, as the daily interest rate is calculated and updated every hour. That is, in terms of commissions, the accumulated interest will be deducted based on the number of hours your order is open.

You can see the Margin Trading interest and commission table here.

Cryptocurrency derivatives on Binance Exchange

Binance Exchange offers two types of derivatives: perpetual futures and leveraged tokens. The latter offer a position with leverage on the Spot market, but without the need for loans.

Perpetual futures available on Binance are different in nature from traditional futures. The reason is that in conventional futures, such as those in the wheat and oil markets, there is a physical shipment of the asset, something that does not happen with futures contracts on bitcoin and other cryptocurrencies. This means that futures can exist without fixed delivery dates. Because of this, the prices of perpetual futures are usually practically the same as those that are traded. Also, within these futures the leverage reaches up to 125x and you can work with Margin Cross and Insolate.

On the other hand, leveraged tokens are assets that represent a shared position on the Binance Spot cryptocurrency market. In other words, you will have an unleveraged leveraged position. This is because among these tokens you will find funds like BTCUP, which will increase your profit if the price of BTC rises; or BTCDOWN, where you will profit if the bitcoin price falls.

The leverage within each asset in this market varies depending on the instrument itself, but the leverage here does not require any type of loan, as there will be more exposure of your money within the position you open.

How to open a cryptocurrency futures account on Binance?

As in the case of Margin Trading, to work with Futures on Binance you need to enable the appropriate wallet. To do this, you need to go to the Futures option that you will find in the portfolio list.

Within the futures portfolio, you can track all the orders you have placed. Source: Binance.

In this case, futures portfolios are divided into two: USDT futures and coin futures (Coin Futures), which differ in available funds. In the case of USDT, all pairs have USDT as the underlying asset, while currency futures (where you can find perpetual futures) work in pairs with the US dollar (USD).

The way it works is the same in both cases, all you have to do is select the Transfer option within the future portfolio of your choice from the Spot portfolio.

Likewise, here you can request loans directly before opening a transaction within the property of your choice.

How to set up a futures account on Binance Exchange?

The procedure is the same as you did when you were doing crypto margin trading on Binance. In this case, you have to select from the futures list the type of asset you want to trade, either coins or USDT. We chose USDT for this example, but note that it is the same process.

The futures interface is the same as the one you work with for advanced trading. Source: Binance.

The way to set up an account is quite simple, as we have already shown you in the tutorial on how to trade on Binance. The difference you will find when working with this tool is that you will be able to change the size of the lever. In the box in the upper corner, you can manually choose which level of leverage you want, with a maximum of 125x and with limits to predetermined amounts depending on the platform, which will be indicated in the same box.

When you increase the margin level, the platform will show you a warning telling you about the risks of trading with high leverage. Source: Binance.

What comes next is ordering. There you will have the same types of orders that you had in traditional and margin trading. Below the order placement box, you will have a leverage meter, which allows you to monitor the risk of liquidation of your position.

Within future orders, please note that you are buying contracts and, in the case of the BTCUSD pair, one contract is equivalent to 100 USD. However, you can work with contract decimals to trade lower units.

How to trade leveraged tokens on Binance Exchange?

The way this type of Binance asset is traded is quite specific. First of all, remember that you are trading in market conditions, whether the price is rising (BTCUP) or the price is falling (BTCDOWN). Within each market, you will be working with USDT deposited within your Spot Portfolio or Master Portfolio because, as we said before, these assets offer a leveraged position without requiring credit.

To get started, the first step is to have USDT in your Spot wallet. Next, you need to go to the Leverged Tokens option, which you will find in the derivatives menu.

The platform offers a ‘Leveraged Tokens’ option located in the derivatives menu. Source: Binance.

The way to work with leveraged tokens is quite simple and it also has a trading interface, via the Trade option that you will find in the token list. In the case of this tutorial, we will go with a simple trading option directly from the listing, with Subscription and Refund options.

To enter the market, whatever it is, you must select the Subscribe option, which will open the subscription box. Inside you just have to indicate the amount in USDT with which you want to open a position and click on Confirm subscription.

When opening a position using the subscription option, it is not necessary to indicate the number of units you want to buy: Source: Binance.

When you open your position, you will be able to see it in the list of leveraged tokens along with the amount and the profit or loss it generated.

To close or reduce a position, you must select the Refund option. In this option you will find a box similar to the subscription box, but here you will see your available amount in the selected token. There you have to enter the amount for the “sale” and that’s it. You will be able to see your available USDT balance within your Spot Wallet.

Conclusion

Margin trading or leveraged cryptocurrency trading within Binance stands out for its ease of use and versatility, as it allows you to customize the modality in which you want to work. This translates into the ability to partially control the risk that margin trading has. In addition, it works in the same graphical interface that we already showed you in the previous article.

As for leveraged Binance tokens, these are interesting types of assets, as you can use leverage without leverage and bet on market conditions. This type of instrument is quite innovative, and this type of asset is not usually found on other exchanges.

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