Trading on margin is a trading product introduced by XREX. We provide the borrowable amount where you can use your existing cryptocurrency holdings as collateral. The collateral supports credit trading positions, allowing you to establish leveraged long or short positions of up to three times.
How does margin trading work?
Margin trading is a financial tool that allows traders to amplify potential gains and losses by the borrowable amount. This enables them to open larger positions than their own crypto assets would normally permit. Traders can utilize this tool in two ways: going long, where they bet on the price of an asset increasing, or going short, where they speculate on the price decline. The results of margin trading are highly dependent on market movements, making it a high-risk, high-reward approach.
📈 How does going long work in margin trading?
In a long position, a trader uses the borrowable amount to buy crypto assets such as BTC or ETH, hoping the crypto asset's price will increase. The trader's goal is to sell the asset later at a higher price, thus making a profit from the price difference. For instance, if a trader buys BTC at $10,000 using the borrowable amount and later sells it at $15,000, the profit is the difference, minus any margin cost and fee related to the margin trading position.
📉 How does shorting work in margin trading?
When selling short, a trader uses the borrowable amount to sell crypto assets, such as BTC or ETH, and sells it immediately at the current market price or sets a limit order. The expectation here is that the price of the crypto asset will decline. If the price drops, the trader can buy back the crypto asset at the lower price, return the borrowed quantity, and pocket the difference as profit. For example, if a trader shorts BTC at $10,000 and buys it back at $7,000, the profit is the $3,000 difference, minus any margin cost and fees associated with the margin trading position.
What are the benefits of margin trading on XREX?
Supported trading pairs and margin levels
Pair | Leverage | Margin call ratio | Liquidation ratio |
BTC/USDT | 1-3x | 120% | 110% |
ETH/USDT | 1-3x | 120% | 110% |
SOL/USDT | 1-3x | 120% | 110% |
XRP/USDT | 1-3x | 120% | 110% |
BNB/USDT | 1-3x | 125% | 115% |
GMT/USDT | 1-3x | 125% | 115% |
BTC/USD91 | 1-2x | 125% | 115% |
ETH/USD91 | 1-2x | 125% | 115% |
SOL/USD91 | 1-2x | 125% | 115% |
XRP/USD91 | 1-2x | 125% | 115% |
GMT/USD91 | 1-2x | 130% | 120% |
MATIC/USD91 | 1-2x | 130% | 120% |
Common terms-to-know
Term | Description |
Leverage | Leverage refers to the ability to control or trade a position that is larger than your deposited capital. It's essentially an amount provided by XREX, allowing you to amplify your trading position and potential profits, but it also amplifies potential losses. (i.e. 3x leverage is to multiply your position by 3x). |
Collateral | Collateral refers to the assets you deposit to secure a position. It ensures that you have sufficient funds to cover losses if the market moves against your position. |
Borrowable | Borrowable amount refers to the amount of crypto that you can borrow from XREX to open a leveraged position. This amount varies based on the assets you have. |
Margin level | The margin level indicates the stability of a margin position, where higher values suggest greater financial security. Conversely, a low margin level increases the risk of margin calls or liquidation. It is calculated by dividing the total asset value by the total borrowed amount. |
Risk status | Risk status represents your position's margin level and estimated liquidation price, indicating the health of your position.
Safe: Your position is currently in a secure state.
Warning: Your position is nearing a margin call. Monitor your position attentively and consider adding collateral to enhance its safety.
High risk: Your position is on the brink of liquidation. It's imperative to add collateral immediately to safeguard the position. |
P&L (Profit and Loss) | Unrealized P&L refers to the potential profit or loss of your current open position. While realized P&L refers to the actual profit or loss of the positions you've closed. Learn more about estimated profit and loss. |
Liquidation price | In margin trading, your long position will be liquidated if the price of the borrowed crypto falls to a certain threshold, while your short position faces liquidation when the price rises to this level; in both scenarios, you can avoid liquidation by increasing collateral when the market trend moves against your position. |
Hourly margin cost | If you borrow an asset from XREX to open a leveraged position, when the position is opened you will be charged margin cost based on the asset and the amount borrowed. |
Accrued margin cost | This refers to the total unpaid margin cost for the position. You will be charged this margin cost when the position is fully or partially closed. |
Total debt | This refers to your total borrowed amount and the accrued margin cost. |
Total repayment | This is the total amount you've repaid, including the borrowed amount and the margin cost. |
Limit vs. market order | A limit order specifies the exact price for a trade and may not execute if the market doesn't reach that price, while a market order executes immediately at the current market price, but without price certainty. |
Position closable | Position closable refers to when you have an opposing position to the one you wish to open, the existing position can be used as part of the funds for the new position since it signifies you're in the process of closing the position. |
One-way mode | There can only be 1 position per trading pair, either long or short. |
Fees, limits, and margin cost
Trading fees
Trading fees are a fundamental aspect of both spot and margin trading. The fee structure varies slightly between these two types of trading:
Spot Trading: In spot trading, trading fees are deducted from the amount you trade. This is a straightforward calculation where the fee is a percentage of the transaction volume.
Margin Trading: In margin trading, please note that fees are charged differently:
Buy Orders: For buy orders, the fee is calculated as: filled_amount * price * trading_fee_rate. This fee is charged in addition to the order value.
Example: If you buy 1 BTC at a price of $45,000 with a trading fee rate of 0.1%, your fee will be $45,000 * 0.1% = $45. So, the total amount you need to pay is $45,000 + $45 = $45,045.
Sell Orders: The fee structure for sell orders in margin trading is similar to that of spot sell orders.
For more detailed information on our trading fees, please refer to this article: How much is the trading fee in XREX?
Hourly margin costs
When a margin position has been opened, margin costs will accrue as you are now borrowing from XREX.
The margin costs are calculated by the borrowed asset type and the current value, and will be charged hourly at the time of borrowing.
If you have borrowed for less than 1 hour, the margin costs will still be calculated as if the asset were borrowed for 1 hour.
Margin costs for coins and tokens
Frequently asked questions
What is meant by estimated profit and loss for both long and short positions?
The estimated profit and loss (P&L) for both long and short positions is a provisional calculation to gauge potential gains or losses when closing a position. Please note that these estimates do not include additional factors such as trading fees and margin costs, so the final amount may differ.
For a long position, it's calculated using the formula: (Close price - Avg. entry price) * Amount.
For a short position, the formula is: (Avg. entry price - Close price) * Amount.
Where can I locate the margin calculator?
Navigate to margin, select three dots, and click "calculator". Here you can exemplify potential results based on leverage, entry price, closed price, and amount. In this way, you can easily experiment and determine the collateral you provide, the amount you can borrow, and the estimated profit and loss. Please note that calculation results are for reference purposes only and do not include margin costs and fees.
What is the difference between short and long positions?
The difference between short and long positions in trading refers to the direction in which you expect the price of an asset to move. A long position is taken when you expect the price to rise, while a short position is taken when you expect the price to fall.
How does collateral work in margin trading?
In margin trading, collateral is the trading principal you pledge to open and maintain a position, whether short or long. This applies to trading various cryptocurrencies like Ethereum, Bitcoin, etc. You can select a trading pair, typically quoted in USDT, and pledge it as your collateral. This collateral is directly pledged from your spot wallet, streamlining the process of opening and adjusting your position, thereby making it simpler and more user-friendly. The rules for collateral are consistent across USDT pairs.
What are the rules for adjusting collateral in margin trading?
Decreasing Collateral: You can decrease the collateral as long as the margin level remains equal to or higher than the 200%.
Increasing Collateral: You are free to increase the collateral at any point before the system initiates liquidation. Additional collateral is also pledged from the spot wallet.
How does the size of collateral affect liquidation in margin trading?
The margin level, dictated by the size of your collateral, directly impacts the liquidation process. When your margin level falls to around 110% (depending on the trading pair), the system will initiate liquidation based on the liquidation price.
Adjusting the collateral (increasing or decreasing) affects variables like margin level, liquidation price, and profit & loss (P&L). Increasing collateral raises the liquidation price whereas decreasing it lowers the liquidation price. In the event of liquidation, there could be a total loss of collateral, especially if the market is highly volatile.
When should I close my position in margin trading?
You should consider closing your position when the margin level is satisfactory to take profits, or if the margin level is trending downwards, to prevent further losses. Timely decisions can significantly impact your trading outcomes.
How can I avoid liquidation in margin trading?
While it is impossible to completely avoid liquidation if the margin level falls to around 115% (depending on the trading pair), you can take steps to minimize the likelihood of it occurring:
Monitor the market closely and manage your positions proactively to exit trades in a timely manner to avoid larger losses.
Increase your collateral to improve the margin level and raise the liquidation price.
How does margin trading work in the context of liquidation?
In margin trading management, each short or long position is treated independently, safeguarding your entire holdings from being at risk. The net asset in each isolated margin account is used as margin for the specific trading pair. If you open multiple positions under the same trading pair, they are combined and may be liquidated together if the situation calls for it.
What is a cooling-off period and why should I consider enabling it?
The cooling-off period provides you with time to reevaluate your trading decisions, conduct further market research, and consider the risks and consequences of your trades.
If you encounter several liquidation and margin calls over the past 72 hours, we will suggest you enable the cooling-off period.
You will not engage in margin trading during the cooling-off period. However, you are still allowed to adjust the collateral of your positions.
What is the purpose of the self-assessment test?
The self-assessment test for margin trading aims to ensure that traders understand the risks and basics of margin trading, promoting informed and responsible trading practices.
What is meant by borrowable amount in margin trading?
The borrowable amount is the maximum funds you can borrow to open leveraged positions in cryptocurrency trading. This figure varies depending on the market value of the assets you hold and is crucial for leveraging your trades—enabling larger positions than your existing assets would allow. Whether aiming for a long (betting on a price increase) or short (speculating on a decrease) position, the borrowable amount magnifies both potential profits and losses, reflective of leveraged trading's high-risk, high-reward nature.
How can an existing position influence opening a new one in margin trading?
In margin trading, the concept of a "position closable" emerges when you're ready to pivot from your current strategy. This means if you have an existing position that opposes the new one you intend to open, the original position can be leveraged as part of the collateral needed for the new trade. Essentially, it's a strategic move indicating you're in the midst of closing out your previous position to seize a new opportunity. This approach enables more fluid management of your trading positions, reflecting the dynamic nature of margin trading where adapting to market conditions swiftly can be crucial.
What actions can I take based on my risk status to maintain or improve the health of my margin position?
Your risk status in margin trading is a critical indicator of your position's health, offering insights into when and how to act to secure your position:
Understanding your risk status:
Safe: Indicates a secure position, with your assets well covering your debts. It's an opportunity to either consolidate your position or explore growth strategies carefully.
Warning: Signals that your margin level is approaching the minimum requirement. This is a crucial time to assess your position and consider bolstering it by adding collateral.
High risk: Means your position is dangerously close to the liquidation price, necessitating immediate action to add collateral and avoid liquidation.
Recommended actions:
In safe and warning statuses, it's wise to keep a close eye on market trends and your margin level. Increasing your collateral during a warning phase can prevent slipping into high risk.
For high risk status, promptly increasing your collateral is imperative to protect your position from being liquidated. This might involve depositing more assets to your account.
Proactive measures:
Monitor your margin level regularly: Stay informed about how market changes impact your risk status.
Proactively add collateral: Enhancing your margin level before reaching a warning state can help maintain your status within the safe status, offering better protection against market downturns.
By closely monitoring your risk status and understanding the appropriate actions to take at each stage, you can navigate margin trading more effectively, safeguarding your position against undue risks.
How can I see the impact of margin trading on my profits and losses?
To explore the impact of margin trading, navigate to the Margin, click on the three dots for more options, and select "Tutorial" to find our P&L comparison tool. This tool allows you to simulate Bitcoin price changes and visualize how leveraging affects your potential gains and losses. It's designed to help you make informed decisions by providing a clear comparison between outcomes with and without leverage, enhancing your trading strategy planning.
How does Isolated Margin enhance trading strategy?
Isolated Margin ensures each position—whether short or long—is treated as an independent entity, using the net asset value of each isolated margin account for that specific trading pair, thereby protecting your portfolio from widespread risk; however, it's important to note that if you have multiple positions for the same trading pair, they are considered collectively, which could lead to a combined liquidation in certain scenarios.
Risk disclosure
Cryptocurrency margin trading ( “margin trading”) has combined the new transaction natures of collateral assets and loans. You may sustain a significant or total loss when the crypto market fluctuates. You should consider your own risk appetite, financial capacity, and situation when deciding whether you are suitable for engaging in margin trading. Before you decide to conduct any margin trading, you should understand the following and assume the risk thereof:
Margin trading is designed for experienced users, such as traders who adopt proactive or diverse strategies. When engaging in margin trading, you should be highly cautious, and only engage in such transactions when you clearly understand the mechanism of margin trading and you can assume the related risk from such transactions, including but not limited to, forced liquidation of collateral assets and volatility of the market price, etc.
Unless specified otherwise, margin trading at XREX is conducted by the isolated margin. Each margin trading position is independent of another.
When you initiate a margin trading position, you are provided with an amount by XREX, allowing you to amplify your trading position.
The margin cost of the margin trading is hourly-based, and you have to pay the margin cost when you close your margin position or upon the closing of the margin position. Please note that the margin cost is variable and we have the sole discretion to adjust such cost. You can find more information on the margin cost here.
When the market goes against your margin trading position, we may inform you of upcoming liquidation so that you can maintain your margin level. Please note that you may lose up to all your collateral assets when the market fluctuates and you may be liable for any deficiency when your loss is more than your collateral assets. Furthermore, you understand and agree that even if you initiate a deposit to increase your collateral asset before the deadline, your position may still be liquidated if such a deposit is not completed in time.
In addition to the price of your targeted assets for margin trading, the price of your collateral assets may drop so you have to increase your collateral assets to avoid liquidation. Such fluctuation may cause more loss than you expected.
Your margin position(s) may be forced to liquidate due to the volatility of the margin trading market. Please read our information on forced liquidation here.
To comply with government regulations, XREX Information Security Policy, and Anti-Money Laundering (AML) Policy, it is possible that your transaction might be halted or terminated under exceptional or unexpected circumstances. It may also affect your ability to perform contracts or lead to forced liquidation.
If you engage in margin trading and spot trading at the same time, you should understand there may be a gap in the settlement. And thus, you are responsible for the consequences if you fail to meet the margin call in time.
XREX reserves the right to take any of the following actions at any time: (1) change, suspend, or terminate the operation, services, or products with prior notice. Subsequent measures, including but not limited to closing your positions or implementing other necessary actions, may be taken to ensure the continuity of the service; (2) adjust the fees for the services or products; and (3) for users deemed unsuitable for using our services, XREX may restrict the use of specific features, such as allowing only position reductions or implementing other necessary measures, etc.
The Risk Disclosure and the General Terms of Conditions are intended to be enumerative only, not exhaustive. Thus, these documents do not cover all risks. You should conduct your own risk assessment to avoid unbearable loss.