Trading with Margin
A guide on how to trade with Margin on the Scallop exchange
Welcome to the world of leverage! When a trader chooses to trade on margin, they increase their buying power by borrowing from the exchange at a multiple of the assets they have deposited.
Leverage increases profits, but also increases potential losses.
Say you had $1000 in your exchange account and leveraged 2x, you would have $2000 purchasing power. This means you could go to the market and buy $2000 worth of assets. You would repay the 'loan' when you sell the asset. What does this do to your returns? Well, it doubles them, but it also doubles your potential losses. You pay an interest rate on this loan. Crypto markets are very volatile, so margin traders must be cautious when taking their positions. For this reason, margin trading is not recommended to new traders because it requires advanced risk management strategies. Saying that, let's see how we trade with leverage on the Scallop Exchange...
Step 1: Transfer Under your account balance information, click ‘Margin’. Transfer funds into your new Margin Trading Wallet.
Step 2: Loan Click 'Loan,' input the loan amount, note the hourly interest rate, and then click 'Confirm.'
The money will be credited to your margin account, which you can view by clicking the Balance/Margin option
Scallop reiterates that high leverage is an extremely high-risk trade which may result in losses and should be used only by experts who can manage their risks.
Step 3: Trade: To trade using borrowed funds, go to the Exchange website, choose the 'Margin' tab, and simply begin trading. If you feel the asset will appreciate, take on a Buy/Long position, and if you feel the price will fall then Sell/Short the product.
The trade window
..and you're done. You are borrowing from Scallop to trade on leverage. Simple.
Next let's take a look at another leveraged trading product.. futures!