How to Generate Profits Using Margin Trading?
Method 1: Exploiting Price Increase
Let's take BCH/USDT as an example:
- Assuming the BCH/USDT market offers leverage of up to 4X, and you predict that the price of BCH will rise.
- The current BCH price is 200 USDT.
- You have 1,000 USDT in your account balance, which allows you to borrow a maximum of 3,000 USDT.
- Utilize 4,000 USDT (including your capital and borrowed funds) to purchase 20 BCH at the price of 200 USDT.
- Sell the 20 BCH at the price of 300 USDT, resulting in a profit of 6,000 USDT after repaying the borrowed funds.
Your Profit: Gained USDT upon sale - Borrowed USDT - Original assets
= 6,000 USDT - 3,000 USDT - 1,000 USDT = 2,000 USDT
Please note: The calculation above excludes borrowing fees for simplicity.
Method 2: Capitalizing on Price Decrease
Using the BCH/USDT market as an example:
- Suppose the BCH/USDT market allows leverage of up to 4X, and you anticipate a decline in the BCH price.
- The current BCH price is 200 USDT.
- You have 5 BCH in your account balance, equivalent to 1,000 USDT, and can borrow a maximum of 15 BCH.
- With these assets, you can sell 20 BCH (including your own and borrowed coins) at the price of 200 USDT, resulting in a total of 4,000 USDT.
- Use 1,500 USDT to buy 15 BCH at the price of 100 USDT, generating profits for repayment.
Your Profit: Gained USDT upon sale - Borrowed USDT - Original assets
= 4,000 USDT - 1,500 USDT - 1,000 USDT = 1,500 USDT
Please note: The calculation above excludes borrowing fees for simplicity.
Risks
Margin trading provides the opportunity to amplify gains with a smaller capital investment but also exposes traders to increased losses if the market moves unfavorably. We strongly advise novice traders to avoid highly leveraged trading to prevent forced liquidation.