Margin trading – is a method of carrying out asset purchase and sale transactions using the funds that are provided by the Binapex exchange on credit against the security of your deposit. Margin trading is carried out with the provision of leverage. When you place an order in the margin trading section, all the funds you use are borrowed from the exchange. Margin trading on the Binapex exchange is not available for certain currency pairs. Currency pairs open for margin trading are marked in green (for example, BTC-USD). In case of high volatility of any market, Binapex reserves the right to temporarily suspend margin trading on this market, notifying users about it.

What is position?

When you borrow funds and make a trade, a position will open. If you buy, you are opening what is called a long position. If you sell, you are opening a short position. Note that as you continue to trade, your position may change. For example, if you open a short position by selling 300 BTC, but then buy 600 BTC, your short position will become a long. When you close your position at a profit, the profit will be credited to your account.

Maintenance Margin

Position maintenance margin consists of 2 parts. The first part equals the exchange commission for the execution of the order in the current market (usually it’s 0,2% of order amount, for more information on each market, see the “Fees” section.). The other part is a percentage for using borrowed funds to open a position. The total value of these two parts makes maintenance margin. Note that maintenance margin value changes through time! The longer you hold your position open (the longer you use borrowed funds), the greater the maintenance margin amount shall be.

The interest for using borrowed funds makes 0,0125% of the amount of the margin loan provided per hour or 0,3% of the amount of the margin loan provided per day. The recalculation of interest for the use of the borrowed funds for open positions is carried out automatically every hour.

What is closing position?

The position is closed by the user. Position is considered to be closed at zero amount. When closing the position, the user’s balance increases by the base amount available less deposit in open orders and maintenance margin.

What is Forced Liquidation?

A forced liquidation is when all or part of your positions are closed automatically to prevent further loss. Forced liquidations occur when current price on the selected market reaches the close price:

close_price = - (base_amount + margin - fee) / amount

It is strongly advised that you check the markets and your open positions regularly, mitigating your risk as necessary by reducing the size of your positions. Markets can change very quickly, and no guarantee can be made that you will receive a margin call warning in time for you to prevent a forced liquidation. The position closes when Bid (or Ask) dips below (or reaches) the close price.

Opening a long position (LONG)

For example, the purchase price of 1 BTC is 30 ETH, and you are absolutely sure that BTC will continue to grow.

To buy 100 BTC you’ll need 3000 ETH + 3000 ETH * 0,2% = 3006 ETH.

When using leverage 1:10 to borrow 3006 ETH you will need a 300,6 ETH deposit.

The interest for using borrowed funds is 0.3% of the position value per day (0.3% equals 0.003 of the position value).

After order execution, we have an open position for 100 BTC and - 2705,4 ETH (3006 ETH for the purchase - 300.6 deposit) with an input price of 30 ETH.

First case. If the BTC rate rises to 40 ETH within 2 days and you sell the BTC at this peak, your profit will be (0,2% fee for 100 BTC order will make 0,2 BTC, that with an average sale price of 1 BTC to 30 ETH will be 6 ETH):

100*40 – 8 (purchase funds – exchange fee) - 2705,4 – 18 (borrowed funds and interest on the use of the loan) - 300,6 (deposit) = 968 ETH.

Note that in the same trading circumstances, but without using leverage, your profit would be 400-0.8 - 300-0.6 = 98.6 ETH. So, the initial profit when trading with a leverage is multiplied by the leverage amount and then decreases by the amount of interest for using the borrowed funds.

Second case. If the BTC price starts to fall, then when it reaches a certain critical point, you will lose all of your deposit. In this case, this critical point will be slightly above 27.054 ETH for 1 BTC, because if the price falls below this point, even if all BTC are sold (for example, at the price of 25 ETH), you will not be able to fully pay back the loan amount. The price for the position liquidation in this case does not exactly equals 27,054 ETH, because amount for paying back must also include interest for using borrowed funds. The longer the period of using loan, the greater the refund amount will be.

The change in the closing price is possible by increasing the margin. That is, by making an additional deposit to your margin account. For example, in the current situation, depositing additional 100 ETH to margin account will reduce the closing price to about 26.054 ETH.

Opening a short position (SHORT)

Let’s say the sale price of 1 BTC is 30 ETH, and you are sure that BTC will fall.

The price of 100 BTC equals 3000 ETH - 3000 * 0,2% = 2994 ETH.

When using leverage 1:10 to borrow 2994 ETH you will need a deposit of 299,4 ETH.

The interest for using borrowed funds is 0.3% of the position value per day (0.3% equals 0.003 the position value).

After order execution, we have an open position for -100 BTC and + 3293,4 ETH (2994 ETH of the sale + 299.4 ETH of deposit) with an input price of 30 ETH.

First case. If the BTC rate falls to 20 ETH within 2 days, and you will buy BTC at this peak, your profit will be (0,2% fee for 100 BTC order will make 0,2 BTC, that with an average sale price of 1 BTC to 20 ETH will make 4 ETH):

-100*20 – 4 (purchase funds + exchange fee) + 3293.4 - 12(funds from the sale and interest on the use of the loan) - 299.4 (deposit) = 978 ETH.

Second case. If the BTC price starts to rise, then when it reaches a certain critical point, you will lose all of your deposit. In this case, this critical point will be slightly below 32,934 ETH for 1 BTC, because if the price rises beyond this point, even if all BTC are sold (for example, at the price of 35 ETH), you will not be able to fully pay back the loan amount. The price for the position liquidation in this case does not exactly equals 32.934 ETH, because amount for paying back must also include interest for using borrowed funds. The longer the period of using loan, the greater the refund amount will be.

The change in the closing price is possible by increasing the margin. That is, by making an additional deposit to your margin account. For example, in the current situation, depositing additional 100 ETH to margin account will increase the closing price to about 33.934 ETH.