Margin trading allows users to borrow funds from the platform to amplify their positions using a smaller amount of capital (margin) as collateral.
However, it is important to note that while margin trading amplifies both potential gains and losses. Given the high volatility of digital asset prices, margin trading carries high risks. Please ensure that you fully understand the mechanisms and risks involved before engaging in margin trading.
Core Concepts
1. Basic Concepts
- Margin Account: An independent account for executing margin trades, managing margin, and liabilities. Each margin trading pair (e.g., BTC/USDT) has a separate margin account.
- Transferred Assets (Margin): Assets transferred from your Spot Account to the Margin Account as collateral for borrowing.
- Borrowed Assets (Liabilities): Assets borrowed from CoinEx, secured by the margin.
- Available Assets: Assets in the Margin Account that can be used for opening new positions or transfer-outs. These include both the transferred and borrowed portions.
- Frozen Assets: Assets in the Margin Account that are temporarily locked due to pending orders or other operations.
- To-be-Repaid Assets: The borrowed principal and accrued interest on borrowed assets that need to be repaid.
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Risk Rate: A key indicator to assess the risk of forced liquidation (margin call) in a margin account, reflecting the extent to which total assets cover liabilities.
- Risk Rate = [(Total Assets in Quote Currency - Unpaid Interest in Quote Currency) / Index Price + (Total Assets in Base Currency - Unpaid Interest in Base Currency)] / [(Borrowed Assets in Quote Currency / Index Price) + Borrowed Assets in Base Currency] × 100%.
- A higher risk rate indicates a lower risk of forced liquidation.
2. Advanced Concepts
- Margin Index Price
- Margin Borrowing Interest Rate
- Margin Liquidation Service Fee
- Margin Insurance Fund
Operation Steps
1. Transfer Assets
Users can transfer assets from their Spot Account to the Margin Account as collateral.
- Without Borrowed Funds: All available assets in the Margin Account can be transferred back to the Spot Account.
- With Borrowed Funds: Assets can only be transferred out if the Risk Rate exceeds the "Transfer Risk Rate".
2. Borrow Funds
Users can borrow funds via the "Margin Trading" or "Margin Assets" page.
- Maximum Borrowable Amount = (Total Assets - Unpaid Borrowed Assets - Unpaid Interest) × (Maximum Leverage - 1) - Unpaid Borrowed Assets.
- CoinEx supports Margin Auto Loan & Repayment for your convenience.
3. Interest Calculation and Repayment
- Interest Calculation: Interest is calculated independently for each margin loan. Interest starts accruing upon borrowing and continues every hour (simple interest). Unpaid interest does not compound.
- Repayment: Repayments are settled chronologically. During repayment, interest is deducted first, followed by the principal.
- Loan Cycle: Each loan cycle is 10 days, with Auto-Renewal enabled by default. Renewals will reset the cycle based on the latest borrowing interest rate.
Trading Scenarios
1. Margin Long (📈 Expecting Price Increase)
(1) Scenario: For BTC/USDT (3X leverage), you predict BTC will rise from 5,000 USDT.
(2) Action: With a capital of 5,000 USDT, you can borrow up to 10,000 USDT, allowing you to buy 3 BTC (worth 15,000 USDT) at 5,000 USDT.
(3) Result: If BTC rises to 6,000 USDT and you sell, your profit is 3 BTC × (6,000 - 5,000) = 3,000 USDT. Without margin trading, the profit would only be 1,000 USDT.
2. Margin Short (📉 Expecting Price Decrease)
(1) Scenario: For BTC/USDT (3X leverage), you predict BTC will fall from 5,000 USDT.
(2) Action: With a capital of 5,000 USDT, you can borrow up to 2 BTC and sell them at 5,000 USDT, receiving 10,000 USDT.
(3) Result: If BTC falls to 4,000 USDT, you can buy back 2 BTC for 8,000 USDT, making a profit of 10,000 - 8,000 = 2,000 USDT.
Risk Control Mechanisms
1. Index Price
CoinEx employs an Index Price system that anchors to the spot prices from multiple major exchanges as an exception handling mechanism. This is designed to smooth out drastic price changes in a single market and avoid unnecessary forced liquidations.
2. Risk Rate Thresholds
(1) Transfer Risk Rate: The minimum Risk Rate required to transfer out assets.
- 2X leverage = 200%
- 3X leverage = 150%
- 4X leverage = 135%
- 5X leverage = 125%
(2) Alert Risk Rate: If the Risk Rate ≤ Alert Risk Rate, the system will notify users via in-site messages and email.
(3) Forced Liquidation Rate: If the Risk Rate ≤ Forced Liquidation Rate, forced liquidation will be triggered to repay liabilities.
3. Forced Repayment (Forced Liquidation)
Forced repayment is the ultimate risk control measure where the system automatically liquidates positions to repay liabilities. Trigger conditions include:
- Risk Rate Threshold Breach: Risk Rate ≤ Forced Liquidation Rate.
- Loan Expiry: If Auto-Renewal is disabled and the loan expires.
- Renewal Failure: If Auto-Renewal fails due to insufficient borrowable balance on the platform.
4. Liquidation Price
The Liquidation Price is an estimated execution price calculated based on the Forced Liquidation Rate. When the Index Price reaches this level, liquidation will be triggered.
- Liquidation Price = [(Borrowed Assets in Quote Currency × Forced Liquidation Rate) + Unpaid Interest in Quote Currency - Total Assets in Quote Currency] / [(Total Assets in Base Currency - Unpaid Interest in Base Currency - Borrowed Assets in Base Currency × Forced Liquidation Rate)].
5. Margin Insurance Fund
The insurance fund covers losses from bankrupt positions during extreme market conditions (i.e., when user assets are insufficient to repay liabilities) and is sourced from liquidation fees and 30% of crypto loan income.
How to Lower Margin Trading Risks
1. Use leverage reasonably and control position size.
2. Timely add margin (transferred assets) to ensure the risk rate remains at a safe level (e.g., above 110%).
3. Place Stop-Limit or Stop-Market Orders to secure profits and minimize losses.
Risk Disclaimer
Margin trading allows for the potential to achieve significant returns with a smaller amount of capital. However, if the trading direction is misjudged, losses can also be magnified. Ordinary traders should avoid heavy trading with high leverage to prevent forced liquidations and even position bankruptcy.
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