Margin trading
Also called: trading on margin · spot margin
Definition
Margin trading is trading with funds borrowed from an exchange, using your own assets as collateral, so you can open larger positions or short-sell.
This entry is shown in English.
How Margin trading works
In spot margin trading you borrow coins or stablecoins from the exchange and pay interest, usually charged hourly or daily. Borrowing USDT lets you buy more of a coin than your balance allows. Borrowing a coin and selling it lets you go short. In futures, margin works as collateral for a contract rather than an actual loan, but the idea of trading a larger position on collateral is the same.
Your collateral must stay above a minimum level, known as the maintenance margin. If losses push your margin level below it, the exchange may issue a warning, often called a margin call, and then liquidate your position to repay the loan.
Exchanges offer different margin modes. Isolated margin limits risk to the collateral assigned to one position. Cross margin shares your whole balance across positions. Interest rates, borrowable coins and maximum leverage vary by exchange and change with demand, so check them before you borrow.
Example
Suppose you have 2,000 USDT and use 3x spot margin to buy BTC at 40,000 USDT. You borrow 4,000 USDT and buy 0.15 BTC worth 6,000 USDT. If BTC rises to 44,000, the BTC is worth 6,600 USDT; after repaying 4,000 you keep 2,600, a 30% gain on your capital before interest. If BTC falls to 36,000, you keep 5,400 − 4,000 = 1,400, a 30% loss.
Common mistakes
- Forgetting borrowing interest, which keeps accruing while a position stays open.
- Assuming margin trading is the same as futures, when spot margin involves a real loan.
- Using cross margin without realising that one losing position can drain the whole balance.
Learn and practise
FAQ
What is the difference between margin trading and futures?
Spot margin uses a real loan to buy or sell the actual coin, with interest. Futures are contracts on the price, with funding or a basis instead of borrowing interest.
How does margin trading let you short a coin?
You borrow the coin, sell it, and later buy it back to repay the loan. If the price fell in between, you keep the difference minus interest.