Binance Margin vs Futures Explained: Which Is Best for Trading Crypto?

[00:02] which one is most suitable for your trading so if you do have a binance account you'll see the trade screen has spot and margin together and then Futures is a completely separate thing with margin what you're doing is trading

[00:17] crypto in the spot Market spot is where you buy and hold crypto with cash so you own that crypto and you're actually buying it from someone else or selling it to someone else with margin what you're doing is borrowing money off The

[00:32] you're doing is borrowing money off The Exchange in order to trade spot crypto and therefore you're borrowing more money than you have and you can leverage up your trading so if you have $1,000 you can let's say borrow $2,000 to make

[00:46] a $3,000 position and then you go ahead and buy Spot crypto with that so you're borrowing money with margin with Futures it's completely different Futures are a different Market they're a derivative market and this is a a product a

[01:01] synthetic product which tracks the price of cryptos so you're not buying crypto at all what you're doing is just trading the price with someone else so you're speculating going long or short and the price of this is the same as other

[01:17] cryptos but you're not buying crypto here so with Futures what you're doing is taking synthetic positions on crypto prices with margin uh what you're doing is borrowing actual money to buy and trade actual crypto here's the main

[01:33] you want to trade them you'll pay the spot trading fee for margin which is around 0.1% for futures you pay cheaper trading fees you also get much higher margin with Futures as well and you pay an interest rate when borrowing money

[01:48] with margin with Futures there is no interest rate because you're not actually borrowing money what you're doing is trading on Leverage in Futures and sorting out without any wins or losses via the collateral that you place

[02:03] with margin you know you are borrowing money and then that's separate from the actual crypto positions that you're taking on margin there's no funding rate and that's something that Futures has with margin you are actually just

[02:17] trading in the spot market and borrowing money with Futures because this is in a synthetic contract they have to try and keep this price in line with the underlying spot price and so this funding is a way to do do that and you

[02:30] either pay this or receive this depending on if you're long or short and that can change depending on what the market is doing versus what you're doing in any case funding is something that happens it can be very low or very high

[02:43] and it changes uh depending on market conditions with margin that doesn't happen because you're just borrowing money to actually Buy and Hold crypto if you've traded Trad five products before and equities you may be more comfortable

[02:55] with margin you're literally borrowing money to trade with Futures these are synthe thetic contracts where you just simply swap the price of the asset for you can trade with leverage there because the collateral that you place on

[03:09] your account to trade with is simply there to fund any potential losses if we trade on margin we are borrowing money and so the thing we have to look out for is the interest rate of each asset that's going to change depending on

[03:21] supply and demand so you can see the interest rate history here if you want but if you want to borrow dollars right now it's very very expensive because the Market is very hot during bare markets the interest rate to borrow dollars is

[03:34] going to be a lot lower you can also borrow other assets you know crypto assets which tend to be a little bit lower so a lot of people are paying uh to borrow dollars and the interest rate is very high right now that's worked out

[03:46] as an annual figure but you pay interest hourly so that racks up you can see the hourly interest is right here and that will rack up each and every hour for you if you go over to the margin tra trading screen you can switch switch this around

[04:00] screen you can switch switch this around so we can see borrow and repay so if you want to borrow you can obviously open a position you can see the max leverage here so what you can do is switch this on and then use this as a slider so this

[04:14] automatically opens margin positions for you so let's say you have $1,000 but you actually want your position to be you know 2x or 3x that you can just have that right here and then press confirm and it will open those 3x orders for you

[04:29] so if if you you know enter a $1,000 order it's going to borrow some money and then you have a $3,000 position now that $1,000 is there to fund any that $1,000 is there to fund any potential losses so a roughly

[04:42] 33% loss on your $3,000 Position will obviously wipe out your initial Capital so you can't have any bad debts or you at least at least shouldn't what will happen down here is that you can see your margin level and if it gets down to

[04:56] very very low margin so collateral is about to get wiped out you will not be and eventually they'll actually liquidate your position if that happens liquidate your position if that happens you can of course add uh and repay this

[05:09] collateral as well you can add more to your position to reduce the margin so you can see borrow and repay and transfer here so that can all be done automatically when you open the position or you can do it manually just by

[05:21] pressing these buttons uh and you can add assets in to reduce uh The Leverage exactly how to trade margin and futes on binance I have full video guides for description so it goes through getting set up with accounts how to manage risk

[05:36] or margin as well so check out those videos very different on the future screen though you are not borrowing any money here so what you can do is take leverage because you can simply enter a trade with the market and as long as you

[05:50] have collateral on your account to fund any potential losses they basically let you open you know any position size that you want within reason so we can use isolated and cross margin across both markets isolated is where you borrow

[06:05] money for each individual trade cross is where you borrow money for your account and all trades are using that borrowed money so if you press the margin here or The Leverage here I should say you can change this around right so let's say

[06:18] that I want to open in the market a $110,000 position I can do that with 10x leverage I put $11,000 down so this is all uh you know your value in the market

[06:30] all uh you know your value in the market that you trade so a 10x leverage if you uh confirm that and then you have a $1,000 trade here that means you'll put $11,000 down and open a position of $10,000 if you on a $1,000 position then

[06:45] you put a $1,000 trade in and you fund it with $100 cuz that's one10 so you're just trading with that and using your collateral to fund any losses you can

[06:57] see that down here you'll see your margin in your leverage and you know close to getting liquidated or not and of course you can add extra Assets in to reduce any of the leverage that you're taking but no interest rate here but you

[07:12] do pay a funding fee every 8 hours and that will change over time depending on market conditions another important difference here is that with Futures you're usually just trading the price of something and the way that you exit the

[07:24] position is just taking your position down to zero so if you're long then the way that you close your position is to just cash out of that and then usually you go back into the stable coin and then you actually don't own anything but

[07:38] you've just exchanged the profit or loss for that position with margin what you can actually do is obviously borrow money to take a position and then over time simply pay it off and then you actually own the underlying crypto that

[07:52] you were trading at that time so there is a big difference here this is just for trading the price of things which does allow for some more advanced day trading and hedge fund type strategies with margin you're literally just

[08:04] borrowing money and going about with your trades as normal if you want to know about margin and Futures those videos are down below you can see me trading on binance and other platforms I'll leave some deposit bonus links for

[08:16] the platforms I use down in the description as well I'm James as man G CH for watching and I'll see you in the next one