Spot Margin Trading: Borrowing, Interest, and Liquidation Risk
Summary
The document explains crypto margin trading as borrowing assets to enlarge a spot position, with trades executed on the spot order book. This differs from futures and perpetual swaps, which are contracts tied to asset prices. Borrowed funds must be repaid with interest, and the platform’s description says only assets in the trading account count as collateral.
It emphasizes leverage’s two-sided effect: it can amplify gains and losses. Interest accrues while borrowing remains open, while a maintenance margin ratio at or below the stated 100% threshold triggers automatic liquidation at prevailing prices. The article recommends monitoring the ratio, setting alerts, reducing borrowing, or repaying part of a loan to manage exposure. It is an exchange-specific overview for Singapore users, not a general comparison across venues; product terms and the stated regulatory status are specific to the provider and jurisdiction.
Key ideas
- Margin trading adds borrowed assets to spot trades and requires repayment with interest.
- Leverage magnifies both gains and losses relative to the trader’s own capital.
- Only trading-account assets count as collateral under the described platform rules.
- The article states that a maintenance margin ratio of 100% or below triggers liquidation.
- Monitoring collateral, borrowing costs, and position size can help manage liquidation risk.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.