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A Guide and Review of Margin Trading on Binance with CoinDCX Exchange

I was wondering why DLT pumped. I couldn’t find a reason on search engines. But I presumed there will be a pull back – maybe a tiny one. I immediately wanted to short it when I came to that conclusion. The question – where can I do so, as it is listed on Binance? Answer: CoinDCX.

CoinDCX recently introduced margin trading to their bouquet of crypto trading products with leverage upto 5x. CoinDCX is using Binance and other exchanges’ orderbooks to provide liquidity, this opened up a lot of altcoins for margin trading on CoinDCX. I won’t be wrong if I say we can short or long altcoins on Binance, albeit using CoinDCX.

So, I decided to take a look and try it out. Started by opening a tiny short on DLT. Stick around to know if my trade was profitable.

Short DLT on Coindcx exchange margin trading.
What400 DLT short on CoinDCX at 3x leverage

What is CoinDCX Margin Trading?

Before we answer that question, we must know what exactly is margin trading and why it is good. Simply put, trading on Margin means to trade with only fraction of the total cost by borrowing the rest of the capital from exchange/broker. Effectively, you can increase your investment size.

If you have $100 and the exchange offers 10x leverage, you can effectively open positions worth $1000.

leverage trading on coindcx
Leverage allows you to increase your trading power.

On top of this, margin trading also allows the user to trade on both sides, as in, either bet that the price will go down or up for a certain asset. It is called Long and Short.

  • Long Position – Profit if price goes up
  • Short Position – Profit if price goes down.

CoinDCX offers to place long or short orders with several assets on both BTC and USDT market with upto 5x leverage. However, shorting or longing is not always available on all assets, some markets are adjusted. Either longing or shorting is disabled to accommodate the demand and supply. Once the exchange begins to receive higher trade volume, this problem should be resolved.

As you can see below, not all pairs allow shorting when the screenshot was taken. However, the scenario should be different if you check right now.

The beginning of the list of USDT pairs available for Margin trading.

Placing Orders, Setting Targets

Once you have decided which market to trade on, it is quite easy to place the orders. I have BTC in my wallet, so I will stick to BTC market. I want to Long REP. This is not an investment advice, just a demo.

I can place a Bracket Order with proper stop loss and target price, and that part is optional. Some people stay safe, some traders are more adventurers, they don’t like stop losses. It is a good feature to have so that a trader can sleep in peace without having to stayed glued to the screen.

I do have one negative feedback here. I can see my BTC balance and order value, but I can’t really see the total cost of my order after adjusting the leverage.

For instance, in the screenshot below, the total order value is 0.010695 BTC and my balance is 0.01088 BTC. With 4x leverage, I will only have to spend ~0.0023 BTC or 1/4th of the total order value. Similarly with 3x, I have to spend 1/3rd of the total order value or ~0.00365 BTC. But I cannot see the calculation anywhere. It would be nice to have that.

Placing a margin order on CoinDCX

Fees and Other Charges

Despite the saying best things are free, Crypto exchanges are a stark contrast. Maybe crypto trading isn’t the best thing in the world, so it isn’t free. Philosophy aside, it is important for an exchange to charge appropriate fees to be both – user friendly and profitable.

CoinDCX nails the first part but I don’t know if they are profitable yet with margin trading. It is quite new.

Trading fee is fixed at 0.1% for both buy and sell orders. The fee is charged on order value. As Sumit Gupta, the CEO explained to me on call – If your Long order is worth 1 lakh rupees, the fee is 0.1% of 1 lakh or 100. When you close the position, if the order is worth 1.5 lakh rupees, the fee is 0.1% of 1.5 lakh or 150. So total fee for the entire order is 250. There is no fee on borrowing the margin for the first 48 hours. Post that, CoinDCX charges interest on borrowed margin.

The fees are competitive and in some cases even better than the rest of the exchanges. But how is Coindcx making money? I believe eventually the model will change to make it profitable for CoinDCX, until then it is advisable to enjoy the lower fees while you still can.

Liquidation and Protection of User Funds

The risks of margin trading is liquidation. On exchanges like Bitmex, traders can borrow upto 100x leverage from the exchange. It means that barely 1% of difference on the other side of trader’s position could make the him lose the entire balance. How you ask?

Say BTC price is 3000 USD and I have 30 USD in my wallet. Exchange gives me 100x more leverage. That means I can buy BTC worth 3000 USD or 1 BTC. I buy it hoping for the price to go up.

When BTC price dips to 2970 (or 1%), my position of 1 BTC is in overall loss of 30 USD. That was my original wallet balance. The exchange will not keep my position open any longer and sell it off to settle the trade and avoid letting my balance go negative. CoinDCX ensures that as well.

You can see the liquidation price while placing an order, it is closer to order price when leverage is higher. Your positions will be liquidated if the asset market price reaches your order’s liquidation price.

Liquidation price of REP at 2x, 3x and 4x leverage.

The INR Feeling

One thing that hits home for some traders is the ability to visualise profits in fiat currency. For Indians, the fiat is INR. On CoinDCX all the values are also referred to in INR.

For instance, my DLT short I spoke about earlier, it was closed with ~0.001 BTC profit and some dust was collected as fees. When I opened the details of the closed order, I could see the values in INR. Even the asset prices on the exchange have an approximate INR value shown to users.

Profit of ~INR 252 on trade.

The Final Word

I do like the ability to be able margin trade on over 100 assets, it is brilliant. However, with great power comes great responsibility. So as a trader you must keep a hard watch on your trades.

Another thing that I like about trading on CoinDCX is that the office is in India and the exchange folks are fairly responsive. I’d want to be able to immediately report an issue if I face one. Fortunately I did not run into issues today.

No fees on margin for 48 hours and 0.1% on orders is a good deal. The only other Indian exchange offering margin trading is Bitbns, but their model is entirely different. On Bitbns, the margin is provided by other users while the exchange is the provider of the margin on CoinDCX.

I do not like the fact that some markets are closed for shorting or longing periodically due to too much demand/supply, but I believe that should be resolved once there are a lot of active traders on the platform. I am sure CoinDCX will introduce the cost value feature soon. I recommend trying it out, with smaller positions initially.

You can check out CoinDCX margin trading page and their introduction for more information.

Edit: Margin fee was updated.

Disclaimer: This is not a trading advice, all the traders shared in the article are real but only for educational purposes. Coin Crunch writers share referral links occasional on articles such as this one and receive a referral bonus from the exchanges on user trades but it in no way affects the experience of the users. Cryptocurrency trading is highly volatile and risky, please do your own research for investing. Coin Crunch India will not be liable for your losses.

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