Spot Margin Trading Guide

[Estimated Reading Time: 3 minutes]

This article explains how margin trading works on Bitget EU, including key mechanisms such as leverage, interest, and liquidation risk. Understanding these concepts will help you manage risk and use leverage more effectively.

What is margin trading?

Bitget EU Spot Margin Trading allows you to borrow crypto-assets provided you have avialable the requried amount of initial crypto-assets and are able to maintain the collateral (margin) requirements throughout the duration of the crypto-asset loan. For example, the BTC/USDC trading pair supports 10x leverage, which means that you can borrow 90 USDC with just 10 USDC in your margin account, giving you a total of 100 USDC to trade (i.e. buy BTC).

By enlarging the amount of crypto-assets you have avaialbel for trading through a loan, you can increase your exposure without initially holding a lot of crypto-assers in your account. In order to guarantee the repayment of the borrowed crypto-assets, however, you will have to maintain a certain position value or amount of crypto-assets in your margin account as collateral.

It’s also important to highlight that while profits can be amplified, so can potential losses. The higher the leverage, the higher the potential risk (e.g., the risk level of 10x leverage will be signifcantly higher than that of 2x leverage).

Key terms in Bitget EU margin trading

Margin account: an account that is used for leveraged borrowing or trading. Margin accounts include cross-margin accounts and isolated-margin accounts.

Cross margin mode: A mode where all supported crypto-assets are shared as collateral. Risk and crypto-assets (collaterals) are pooled across your different positions. Each trade could potentially result in the liquidation of all your crypto-assets in your cross margin trading account.

Isolated margin mode: A mode where each trading pair has its own independent account. Risk and crypto-assets are isolated per pair (position). Isolated Margin mode restricts the collateral used for a specific trading pair to that trading pair alone.

How is interest calculated?

Since margin trading involves borrowing crypto-assets from Bitget EU, loan repayment will involve interest rates. The interest you owe for a particular position will be calculated with the following formula:

Borrowed amount × Daily interest rate ÷ 24 × Loan duration (in hours)

For instance, if you borrow 100,000 USDC from Bitget EU, which is subject to a 0.03% hourly borrowing fee, the interest will be approx. 720 USDC after 24 hours. It will be increased to 1,080 USDC after 36 hours. The paid interest may have a significant effect on your profit and loss.

What is the margin level, and why is it important?

Margin level is a risk metric that shows the health of your margin account.

If the margin level reaches ≥ 0.8, a margin call is triggered. In order to avoid a margin call, you must have enough crypto-assets (collateral) in your (margin) account(s).

Liquidation occurs when your margin level reaches or exceeds 1 (liquidation threshold). This means your liabilities (outstanding loan amountts), adjusted by the maintenance margin ratio (set by Bitget EU), equal or exceed your net assets.

What are the risks of margin trading?

One of the biggest risks of margin trading is the increased potential for losses. If the market moves against a trader's position, they can lose their invested crypto-assets much quicker and permanently. This is because the borrowed crypto-assets amplify both gains and losses. The risk of a total and irrecoverable loss due to a forced liquidation of the traders margin position or margin account is much greater for margin trading and cannot be compared to normal spot trading. Traders need to carefully manage their positions and should set stop-loss orders to limit their potential losses.

Another risk of margin trading is the possibility of a margin call. If a trader's account value falls below a certain level, traders should take actions to improve the financial health of their positions or margin account to avoid liquidation.

Disclaimer and Risk Warning

All trading tutorials provided by Bitget EU are for educational purposes only and should not be considered financial advice. The strategies and examples shared are for illustrative purposes and may not reflect actual market conditions. Cryptocurrency trading involves significant risks, including the potential loss of your funds. Past performance does not guarantee future results. Always conduct thorough research and understand the risks involved. Bitget EU is not responsible for any trading decisions made by users.