Comprehensive Manual to Bitget Spot Margin Trading
What Is Margin Trading and How Does It Work?
Margin trading describes the process of borrowing a sum of money or cryptocurrency that you’ll then invest or trade with to amplify your profits. By enlarging the amount of capital you have through a loan, you can increase the amount of earnings without initially holding a lot of equity on hand. In order to guarantee the borrowed sum, however, traders will also have to make a deposit that’ll serve as collateral, and it’s also important to highlight that while profits can be amplified greatly, so can potential losses. While your positions are open, you will need to keep up a maintenance margin and meet any margin calls issued. If your risk ratio becomes too high, Bitget will exercise the right to force liquidate some or all of your positions in order to meet your repayment amount.
Buying Long or Selling Short
Margins work with both long and short positions in spot trading. With going long, Bitget will provide a maximum leverage of 3x for cross margin modes and 10x for isolated margin modes in USDT. You can then take that sum to purchase the cryptocurrency you desire and hold it until its price increases, subsequently selling for a profit. In the case of shorting, our exchange will instead lend you the cryptocurrency you’re looking to short so that the total amount borrowed by you will be significantly larger. If or when the price drops, you can then subsequently buy back those tokens and repay at a profit.
Isolated Margin Mode and Cross Margin Mode
In margin trading, there are two main margin modes: isolated margin and cross margin. Isolated margin restricts a margin pool to just one single position, so that in the case of a margin call for any other positions you hold, your other isolated margin positions would not be affected. The mode benefits from greater flexibility while offering more certainty in your risk exposure, as a margin call for the isolated margin position would only result in the closing of that particular position.
Cross margin on the other hand takes a large margin pool and applies it across your numerous positions held. The margin can be assigned and shared throughout your portfolio, meaning you won’t be as exposed to sudden liquidations and can better mitigate losses coming from individual positions. However, if you’re hit with a margin call, the broker or exchange can close any of your positions until the call is met.
With Bitget Spot Margin Trading, leverages can reach 10x for isolated margin positions and 3x for cross margin positions. The initial margin required and subsequent margin rates for maintenance margins will vary depending on your tier of leverage.
Since margin trading involves borrowing a sum, loan repayment will involve interest rates. The interest you owe for a particular position will be calculated with the following formula:
The initial calculation of interest for the first period will be based on one full hour, and the rate will be updated on an hourly basis thereafter. If your final repayment time is before the hour, it will also be calculated based on the full hour.
Price Fluctuations In Borrowed Leverage
The amount of leverage you can borrow will depend on your margin mode, initial collateral, and other factors. To protect you from market volatility altering the amount of leverage you can borrow, Bitget will subtract from the available leverage the general price volatility of a given cryptocurrency before calculating how much you’re eligible to borrow. This way, the risk of your leverage order failing will be reduced.
Automatic Borrowing and Repayment and Manual Borrowing and Repayment
To make your trading experience more convenient, Bitget’s spot margin trading service offers automatic borrowing and repayment features, meaning we’ll calculate the amount you can borrow automatically for you when you place an order, and also settle any loan repayments for you when you close your positions. Alternatively, you can choose to carry these steps out manually.
All repayments must be made in the cryptocurrency that was borrowed, and interest will be repaid first before the sum itself.
Liquidations and Margin Calls
Calculating Risk Ratio
When spot margin trading on Bitget, there are generally two scenarios in which your account and positions could be liquidated in order to meet your outstanding debt and liabilities. The first scenario is concerned with your Risk Ratio, which is calculated with the following formula (the formulas for total debt and net assets can be found below):
If the ratio rises above 1, the platform will automatically deduct funds from your margin account to repay your loan. In the event that your balance is below the sum owed, forced liquidation will be carried out.
Maintenance Margin and Margin Account Value
In order to avoid a margin call, investors must also have enough in their accounts to cover the maintenance margin set by the exchange on top of keeping their risk ratio below 1. The maintenance margin required is generally lower than the initial margin and will depend on a margin ratio set by the broker or exchange. To calculate exactly how much you’ll need in your account to avoid a margin call, you can use the following formula:
If the value of your account dips below the required maintenance margin, Bitget will issue a margin call. You will then have a short period of time to meet the call by either injecting new equity into your account or by closing certain positions until your cash flow satisfies the maintenance margin.
Total Debt and Net Assets
Understanding your net assets and total debt liabilities will allow you to better handle your risk when spot margin trading. In general, net assets are calculated as such:
Total debt can be calculated with the following formula:
Margin Insurance Fund
Bitget holds a margin insurance fund to make up for any losses incurred by traders upon a margin call and/or liquidation. The fund draws value from liquidation clearance fees as well as income from spot margin trading and steps in in the event that an investor is unable to repay his margin loan and interest. This will prevent users from suffering from excessive losses and negative equity.
Margin Liquidation Prices and Clearance Fees
In the event that your Risk Ratio rises above 1, Bitget will begin deducting funds and liquidating assets from your margin account in order to repay your debt. In most cases, if your positions are able to cover your risk to reduce, Bitget will close out a portion of them until your Risk Ratio drops back below 1. The formula for this scenario is as follows:
Where market conditions are extremely volatile or your interest rates accrued have become too high, Bitget will make the decision to force liquidate your entire margin account to meet your liabilities. Forced liquidation will involve the following two formulas:
Upon forced liquidation, you will also have to pay a liquidation clearance fee, which will be equivalent to 2% of the value of your assets being liquidated in isolated margin modes and 8% of your maintenance margin in cross margin modes. As mentioned above, the fee will go towards our margin insurance fund in order to prevent excessive losses suffered by our users. Please also note that if your entire margin account’s value falls below 10 USDT, we will also exercise forced liquidation.
Because of market volatility and exchange rate fluctuations, some transactions could be affected by slippage. When your order is received and the best market buying price matches our quotation, there will not be any slippage involved. However, between receiving the order and executing it, if the buying price moves up or down, there will be slippage fees charged. In the case that the buying price moves down, you’ll benefit from positive slippage and a lower execution price. On the flip side, if the buying price moves up, you’ll be affected by negative slippage and will be charged a higher execution price. Because it all depends on market conditions, slippage fees will be calculated based on the average volatility of a specific cryptocurrency during a set period of time. Note that the slippage fee will only be charged in the scenario that your margin account’s Risk Ratio is greater than 1. Normal spot transactions will not incur such fees.
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