How to Trade on Margin in Digital Assets

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The material provided herein is general in nature and does not take into account your objectives, financial situation or needs. While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. For the avoidance of doubt, this article is solely intended to be for general information on the usage of the Huobi Platform and does not in any way constitute as professional advice or financial advice. This is not an invitation or an offer to buy or sell cryptocurrencies, nor is it a recommendation to buy or sell specific types of cryptocurrencies. Trading cryptocurrencies on margin carries a high level of risk that may not be suitable for some. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice.

A resurgent BTC bull?

The digital asset or cryptocurrency marketplace has seen a significant rebound over the past two weeks with the market’s bellweather, BTC jumping over 39.6% from an intraday low of 6,078.05USDT on 13 July to a high of 8,487.30USDT at the point of writing.

The resurgence in digital asset prices was not limited solely to just BTC as Huobi’s weather vane of the industry, Huobi 10 index, also saw a significant upsurge of 22.5%.

This is how margin trading works

Huobi Global’s trading platform provides the capabilities for margin trading, which refers to the practice of using borrowed coins from the exchange to trade a specific coin, which then forms the collateral for the loan from the exchange.

A note of caution though, margin trading is often deemed as a double-edged sword as while the use of leverage can potentially magnify gains, it can also saddle the trader with substantial losses.

Taking the example of the BTC/USDT trading pair at the beginning of this article, a timely executed margin trade during that same window would have reaped gains of more than 113%.

How a margin trade with cryptocurrencies would look like

Details of the transaction would have looked like this:

Capital: 100 USDT

Loaned amount: 200 USDT

Convert 300 USDT to BTC at 6,078.05USDT/BTC to attain ~0.049BTC on 13 July.

On 25 July, sell 0.049BTC at 8,487.30USDT to attain 415.878USDT.

Repay loan of 200 USDT as well as interest of 0.1%/day (~2.4USDT).

Profit =  113.478USDT (415.878-200-2.4-100)

While you may have missed the first wave of the surge in BTC prices, fret not! Market watchers such as analysts from eToro as well as consultancy firm, Capco continue to believe that the bullish momentum on digital assets could be sustained particularly in light of increasing institutional demand.

Executing a margin trade on Huobi Global

1. Log into and click on the “Margin” button. You will enter the “Margin Trading” Page.

2. You will see all the available trading pairs for Margin Trading on the left. You can choose to trade any of them.

Reminder: Each trading pair has an independent Margin Account with independent funds. The funds cannot be transferred between Margin Accounts. This means that when you trade across trading pairs and if one particular Margin Account is forced into liquidation or subjected to a margin call, other accounts will not automatically transfer funds to this account. Users need to transfer funds to their affected accounts individually.

3. After choosing a certain trading pair, you can transfer funds as Margin to this Margin Account. Here is an example of XRP/USDT pair:

4. Click on the “Transfer” button and enter the page “Transfer In Margin / From Exchange Account To Margin Account” as shown below. Confirm the coin and amount, then click on “Confirm.”

5. Once you successfully transferred the loan amount to your Margin Account, click on the “Margin Management” button on the right and start Margin Trading.

6. In the “Margin Trading” page, the available amount is based on your loaned amount and leverage time; you can loan as much you need. When there are insufficient funds, please decrease the loan amount.

7. When the loan is completed, you can view the details such as Loan Date and Rate, etc. in the Loan Position.

8. After which, you may execute a trade using the loaned coins!

Final note on risks!
With greater upside rewards come greater downside risks, do note that margin trading is best left to sophisticated users and/or high-net worth individuals who are aware of the associated risks. The average user would be better off investing for the longer term in a regular account, rather than trading for the short-term in a margin account.