CoinEx丨The Most Comprehensive Comparison of Margin Trading Platforms: Which One Is the Best for You
How to trade in the crypto world at a low cost? In addition to spot trading, there is margin trading.
The market has witnessed bearish sentiment for quite a period. With scarce spot trading opportunities, many people choose contract trading that is risky. Spot trading makes 70% of investors suffer losses, and only 1% of the contract traders can earn a profit. More importantly, if the trader doesn’t get technically and mentally prepared, margin trading would be a better choice. Compared to spot trading, margin trading can magnify returns with only a few costs and is thus suitable for audacious investors.
There are many reasons behind traders’ preference for leverage over many other trading instruments. For example, margin trading allows them to trade relatively cheap assets, instead of those quite expensive.
In margin trading, traders can trade with only a fraction of their position, i.e., a margin. So leverage helps traders benefit from well-known financial products. Margin trading involves less capital, a major advantage that is well-received among many traders.
A number of exchanges support margin trading. Not long ago, CoinEx adjusted the leverage. With a variety of leverage offered in the market, how to choose leverage and in which exchange to trade are two questions at hand.
In this article, we will compare the margin trading services of four mainstream exchanges, namely, Binance, Huobi, OKEx, and CoinEx, to help you make well-informed decisions.
With regard to margin trading, the diversity of coins is a concern for retail investors. Currently, we can see that Binance has 152 margin trading pairs, Huobi 190, and OKEx 238. As of July 20, CoinEx supports 28 contract markets (10 coin-margined contracts and 18 USDT-margined contracts) and 149 margin markets.
These platforms also support bilateral trading of multiple coins, such as LINK/BTC, LINK/ETH, and LINK/USDT. You can buy long and sell short at the same time, with both short positions and long positions, thereby locking the position and reducing risks, losses, and profits.
One of the most important considerations for users when choosing a trading platform is the overall facilities. As users need to pay big gas fees for each transfer, a large platform with comprehensive underlying facilities for margin trading boasts great advantages in asset management and consolidation.
Among the four exchanges, Binance, CoinEx, Huobi and OKEX, CoinEx is more robust with the lowest leverage for spot trading of around 3x to 10x. For CoinEx and Binance, the larger the borrowed assets, the smaller the leverage available. OKEX and Huobi will evaluate the user’s ability to trade with leverage based on the net assets of the account, that is, the more the principal, the higher the leverage available.
Higher leverage brings more opportunities but higher risks. CoinEx supports 3x to 10x leverage. And like Binance, it shares all crypto assets as margin, which means all coins of the platform can be used as margin for other coins in margin trading. The leverage available to the user is automatically matched to the net worth of the account. The more assets you have, the higher the leverage available.
In fact, in addition to the interest rate on the borrowed funds, that of transaction fees also take up a large proportion. As the leverage magnifies the original amount of capital, the transaction fee will also increase correspondingly, a cost that cannot be ignored.
Among them, Huobi, Binance, and CoinEx all use the borrowing rate corresponding to the VIP level, that is, the higher the VIP level, the lower the borrowing rate. In other words, if users want to enjoy lower borrowing rates, they have to hold more platform coins and a larger trading volume.
OKEx is more market-oriented in this regard, as its borrowing rates fluctuate with the market. With the number of available loans fixed, when the demand for loans is high, the borrowing rate goes up; when the demand for loans is low, the borrowing rate goes down. In line with economic laws, such a fully market-oriented interest rate will allow more users to enjoy a level playing field.
Risk Control Rate
For margin traders, the priority is to understand how the platform determines the rate of forced liquidation.
Through public information, we can see that the aforementioned platforms generally set the risk control rate as the total funds divided by the borrowed funds. Risk control is mainly reflected in the forced liquidation and pre-warning line. Each platform may have different pre-warning lines. Even if the basic formula remains the same, there are still subtle differences behind the rules. For example, some platforms will automatically deduct the principal and interest when the borrowing expires; if the repayment coins are insufficient, the system will automatically close the position. The risk control mechanism may, if triggered in advance, reduce the loss or bring a rebound.
Overall, the higher the ratio of total assets to borrowed assets, the higher the risk rate. Only when the proportion of borrowed assets is low, the account is less likely to suffer forced liquidation.
To sum up, we can see that the four major trading platforms have their own characteristics in terms of coin types, leverage, transaction fees, risk control, etc. It is suggested that users choose the margin trading service and the exchange as needed.