Spot trading, isolated margin, and cross margin
Did you know that there are 3 main types of trading on Binance? š¤š” Each type has its own advantages and uses, and you should understand them well before trading to avoid risks! š
š In this guide, we will learn about:
ā Spot Trading ā The basic method of trading.
ā Isolated Margin Trading ā Limited risk per trade.
ā Cross Margin Trading ā Using the entire account balance as collateral.
ā¬ļø Follow the step-by-step explanation to understand which type suits you!
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š 1ļøā£ Spot Trading ā The basic and safest method!
š¹ In spot trading, you buy and sell currencies directly at the current market price.
š¹ There is no borrowing or margin, making it the safest and least risky option.
š¹ If you buy BTC with 40,000 USDT, you own all of the Bitcoin in your wallet.
ā When to use spot trading?
š¹ If you want to buy currencies and hold them for a long period (investment).
š¹ If you do not want to risk leverage or liquidation.
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š 2ļøā£ Isolated Margin ā Reduce risk per trade!
š In this type of trading, the amount used is allocated to each trade separately.
š If a trade suffers a loss, the losses are limited only to the balance allocated to that trade.
š” Practical example:
ā You have 100 USDT and want to enter a 5X isolated margin trade on ETH/USDT.
ā Binance will lend you an additional 400 USDT, allowing you to trade 500 USDT.
ā If the deal is successful, your profits will be doubled, but if you lose, you will only lose the balance allocated for that deal.
š„ Why use isolated margin?
š¹ If you want to try margin trading with less risk.
š¹ If you want to control your losses and not put your entire balance at risk.
ā ļø The only downside? If you don't add more collateral, the deal can easily be liquidated!
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š 3ļøā£ Cross Margin ā Higher risk but higher flexibility!
š In this type, the entire margin account balance is used as collateral for trades.
š If a trade suffers a loss, the system can use your available balance to prevent liquidation.
š” Practical example:
ā You have 1000 USDT in your account and want to open a 10X cross margin trade on BTC/USDT.
ā You can trade 10,000 USDT using leverage.
ā If the price drops sharply, your entire account balance will be used before liquidation.
š„ When to use cross margin?
š¹ If you are very confident in market movements and want to limit the risk of liquidation.
š¹ If you trade multiple trades and want to manage margin across all trades.
ā ļø The danger here? You could lose all your available balance if the market moves against you! šØ
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š” How to activate and trade margin on Binance? š¦
š¹ Step 1ļøā£: Open the Binance app and go to āTrading.ā
š¹ Step 2ļøā£: Click on āMarginā and then choose āActivate Marginā.
š¹ Step 3ļøā£: Agree to the terms and complete the quick quiz to understand the risks.
š¹ Step 4ļøā£: Transfer your assets to a margin wallet to start trading.
š„ Do you prefer isolated or cross margin? And why? š¤ Share your opinion in the comments! š¬ā¬ļø
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