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?
Interest Rate: Interest rate charged is computed as a percentage (%) of the token quantity amount, and on an hourly basis. If the token was borrowed for less than 1 hour, the interest amount computation will round it to an hour. (Daily interest rate is 0.098%)
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%.