This post was initially published on CoinGecko in Jan 10th, 2020. Retrieved from https://www.coingecko.com/buzz/coingecko-beginner-s-guide-to-bitmax-io-part-two-margin-and-volatility-trading?locale=en
January 10, 2020 - Posted by Ian Lee
In Part One of this series on BitMax.io, we discussed BitMax.io’s core business model, the team behind the platform, and reviewed the process for sign up and trading. The primary focus of Part One was on cash or “spot” trading, which is the most basic form of trading and therefore the most accessible to beginners; however, BitMax.io’s key differentiations are its innovative products such as Margin Trading and Volatility Cards.
In Part Two of this series, we will explore Margin Trading and Volatility Cards on the BitMax.io platform.
Intro to BitMax.io’s Margin Trading Platform
Trading on margin is the trading process by which traders borrow funds to trade more digital assets than the trader user would normally be able to afford. Margin trading allows users to increase buying or selling power to potentially achieve higher returns. In sum, margin trading amplifies the result of any trade – for example, if a particular trade netted you $100, a 2x leveraged trade — equivalent to 50% margin — would have netted you $200. But the opposite is also true. Potentially higher returns would require to take on commensurately higher risks.
BitMax.io allows users to exercise up to 10x leverage on trading, depending on the amount of capital users have in their margin account. 10x leverage is only accessible to users with balances of over 10,000 USDT (Tether which is pegged 1:1 to the US dollar), while lower leverage is accessible to users with less balance.
Important: Understanding margin calls and mark-to-market methodology in margin trading
Margin calls and mark-to-market pricing are crucial concepts that traders must understand when contemplating margin trading. When trading on margin, positions are marked-to-market periodically, thus resulting in fluctuations in the total value of trading positions. In the event that the market has moved against a trader, assets are deducted from a margin account to represent negative profit net loss (“PnL”). In the event that the market has moved favorably relative to a trader’s positions, positive PnL will be reflected. In the event that a trader’s asset balances fall below a certain threshold, they will be required to post additional assets to maintain sufficient margin (“margin call”) or risk getting their positions forcibly closed (“forced liquidation”).
BitMax.io Margin Trading Terminology
Although margin trading is conceptually the same everywhere, BitMax.io uses specific terminology which users should familiarize themselves with.
- Margin Assets: Your current balance in your margin account.
- Maximum Trading Power: Your Margin Assets multiplied by the maximum leverage for your account. So, if your maximum leverage is 5x and you have 10 BTC held in your margin account, your Maximum Trading Power (the largest order that can be placed via Margin Trading) is 50 BTC.
- Effective Minimum Margin: The absolute minimum amount of margin assets needed to avoid a forced liquidation of your positions.
- Cushion Rate: Margin Assets divided by Effective Minimum Margin. When the cushion rate hits 120% a margin call will be issued. At 100%, the account is subject to forced liquidation at any time.
- Margin Loan: The amount that you are borrowing from BitMax.io to trade. Continuing from the previous example above, if you have 10 BTC in margin assets and place an order for 40 BTC (still within your maximum limit of 50 BTC), your margin loan amount will be 30 BTC.
Speaking of margin loans, don’t loans usually carry interest?
Understanding margin loans and interest payable
In margin trading, traders can borrow capital in order to increase buying and selling power and achieve potentially higher returns. The entity loaning capital to traders charges interest for their service. BitMax.io serves as the sole counter-party to facilitate margin borrow on the platform and charges a daily interest rate per asset for their services. Interest payment is facilitated every 8 hours (at 0:00 UTC/8:00 UTC/16:00 UTC/24:00 UTC). To allow traders to achieve potential higher profitability, BitMax.io offers 0% interest on margin borrow repaid within 8-hours.
There are two ways users can repay the margin loan plus interest.
- Closing out the position: Repayment is achieved naturally by closing out your position. So, if you bought 40 BTC as per the earlier example, you can close out the position by selling 40 BTC. This will cancel out the margin loan amount, minus the interest payable.
- Cash account transfer: Direct transfer from your cash account. This is done when you want to make more trades and need more trading power.
You can view your Loan History through the following steps: Click ‘My Asset’ on top-right menu bar on the homepage –> Select ‘Margin Account’ –> Select ‘Loan History’ tab
BitMax.io’s Point Card – How to save 50% on margin interest
If you want to cut BitMax.io’s already low margin interest rates in half, get the BitMax.io Point Card. It costs 5 USDT, payable in BTMX, BitMax.io’s native token. Each Point Card comes with 5 points, with each point equivalent to 1 USDT. Think of it like a ‘prepaid balance’ from which the margin interest will be deducted from first. Interest incurred post purchase gets a 50% discount when paid with Point Card. However, said discount is not applicable to existing interest. At such a negligible price, if you plan on doing any amount of margin trading at all, it would make sense to get the Point Card.
You can buy Point Cards from the margin trading page, as shown below.
Select ‘Margin’ from the top left menu bar on the BitMax.io homepage
Click Buy Point Card at the bottom of the Margin Summary box
Another alternative is from your Margin Account page after selecting My Asset from the homepage.
Buy your Point Card from this page
How to Use BitMax.io’s Margin Trading Platform
Although margin trading is slightly more complex than regular cash trading, BitMax.io makes it just as simple and convenient as the cash trading.
First of all, there’s no need to set up a separate margin account - you are automatically entitled to one after the regular signup as described in Part One. The margin trading interface is also almost the same as the cash trading one, except for the Margin Summary box, shown below.
You can also toggle between Cash Trading and Margin Trading using the top left menu bar
The Margin Summary box is magnified. Since there are zero assets in the account, the maximum leverage is capped at 3x
How to Open a Margin Trade
Before you can begin margin trading, first make sure you have already deposited funds into your cash account. From there you can transfer funds from your cash account into your margin account through from the ‘My Asset’ page.
After clicking on ‘My Asset’ from the homepage, select ‘Account Transfer’ from the sidebar
And that’s it! Head back to the Margin Trading screen to begin trading. Let’s say you want to open a long BTC position, in this case 0.5 BTC at 2,000 USDT (assuming 1 BTC is worth 4,000 USDT), which is well within the max buying power of 2,939 USDT (nearly 3x leverage as Margin Assets total 1,000 USDT).
As you can see, there’s no need to ‘manually’ obtain a margin loan—BitMax.io’s system does this for you automatically. As long as the order is within your max trading power, it will go through.
Closing a Margin Trade
Now let’s see how to close the above trade by selling the BTC we just bought. Once again, BitMax.io makes this very easy. Users have the option of a one-click ‘Unwind All’ button (for totally closing out the position), or a more manual slider for a more proportional reduction.
The two options illustrated: ‘Unwind All’ button and manual slider
And that’s basically all you need to know to begin margin trading with BitMax.io.
The Top 3 Strengths of BitMax.io’s Margin Trading Platform
To sum up the top three strengths of BitMax.io’s margin trading platform, here we are:
- Cross-Asset Collateral: You can post collateral to fund trading efforts with exposure to various assets such as BTC and ETH.
- Low Interest on Margin Borrowings: Already low margin interest rates are made even more attractive via the Point Card system. Margin Borrow with zero percentage interest when repaid within 8 hours.
- Intuitive Workflows: Leveraged trading is accessible via a user interface that is easy to navigate with intuitive workflows to both execute and unwind margin trades.
For any trader looking to trade crypto on margin, it would be tough to go wrong by choosing BitMax.io; however, margin trading is just ONE product from BitMax.io’s suite of innovative offerings — volatility trading is another great example.
Introduction to BitMax.io’s Volatility Cards
Cryptocurrency market is notoriously volatile. Wouldn’t it be great if you could profit not based on the direction where an asset moves, but by how much? That’s the essence of volatility trading, and it’s also one of BitMax.io’s most exciting innovations.
At present, BitMax.io allows volatility trading for BTC, ETH, or EOS. Its prediction windows - the amount of time you have for the asset’s price to move within or above your stated range - can be set at 10 minutes, 1 hour, or 1 day.
There are two forms of ‘positions’ you can take with BitMax.io, and they are represented by their Turtle and Bunny cards.
- Turtle Card (Within a Set Range): A bet that an asset will trade within a certain range in a prediction window. E.g. If the BTC/USDT price moves less than or equal +/- 2% within 24 hours, the position will yield positive return.
- Bunny Card (Above a Set Range): A bet that an asset will trade above a certain range in a prediction window. E.g. If the BTC/USDT price moves by greater than +/- 2% within 24 hours, the position will yield positive return.
Essentially, the Turtle and Bunny cards are just opposite sides of the same trade. Now, how are the payouts calculated? It’s quite simple.
- Position Closes Against You: You will receive no payout and you will be out the price of the card.
- Position Closes In Your Favor: You will receive the Notional Value of the contract minus the price of the card. So, if the notional value of the contract is 10 USDT and the card costs 4.50 USDT, you will receive 5.50 USDT.
How to Use BitMax.io’s Volatility Cards
All of BitMax.io’s innovative products are intuitive to interact with and its Volatility Card is no different. First, go to the Volatility Card page by clicking on the relevant icon from the Card dropdown menu on the homepage.
From there you will be brought to the following page where you can select your asset and desired prediction window. Note that ranges are preset and that affects the price of the card. BitMax.io also helpfully lists out the Expected Return of each card which is just the Notional Value/Card Price.
Clicking on the ‘Buy Now’ button will bring up the following screen, which lays out the full details of the potential trade.
Just click ‘Confirm’ and that’s it! Everything from there will be handled automatically.
Conclusion: BitMax.io Makes Margin and Volatility Trading a Breeze
From basic cash trading to more advanced margin and volatility trading, BitMax.io offers users a comprehensive suite of innovative and intuitive products. Functionality, speed, and convenience are highly desirable features amongst today’s crypto traders, and the BitMax.io platform delivers all three in spades.