Margin Trading

Potential Margin Trading Opportunities Coming to Binance. Is it Good?

As potential margin trading opportunities coming to Binance, a question is being asked whether it is a good idea or not.

3 weeks ago, Binance made a minor update to public API documentation, which incorporated a code indicating that Binance has plans to implement margin trading on its platform.

Indeed, it stirred up the cryptocurrency community which is hoping for larger profits with new trading strategies. However, the idea of margin trading bounces over the heads of many traders. Let’s see if it’s a good idea!

Margin Trading: Introduction

Margin trading is more common with Forex than digital currencies. However, there are exceptions too. As indicated by a trading manual of Inside Bitcoins, traditional financial market traders are familiar with margin trading with cryptocurrencies, but they’re trading CFDs, not actual cryptocurrencies.

Now, that margin trading might be possible with actual cryptocurrencies on Binance, does this mean that CFD brokerages will vanish and Binance will get more consumers?

Margin Trading isn’t for Everyone

There’s no denying that margin trading is limited. Indeed, traders can generate profits, but what needs to be considered is the “narrow margin” which these traders need to execute the trades. Forex might be an ideal market for this sort of trading owing to the relatively low volatility. But, when it is about digital currencies, margin trading can either be a blessing or a curse.

Not Many Advantages of Margin Trading

The only advantage of this type of trading is ‘Leverage.’ You get more funds to trade with, that can potentially get you more profits.

For example, the volatility of the market is highly stable, meaning that there are no significant price decreases or increases. At press time, it’s daunting to have major gains with or without leverage. Thus, everyone is obliged to sit tight and wait.

Why Should You Use Margin Trading?

The only reason why someone would go for margin trading is their frequency of making trades in the market. In case a person is a day trader who usually closes his trades within 24 hours or 48 hours, then using leverage seems to be realistic.

But that is the only case where it’s useful.