In Margin trading, you borrow funds from other users instead of funding your own. This means that every time you place a margin order, all of the money you are using is borrowed from other users offering their funds as peer-to-peer loans. The funds in your margin account are used only as collateral for these loans and to settle debts to lenders.

The following are few terms and concepts that you should be familiar with before doing Margin trading:

Positions
A position will open every time you make a margin trade. A long position is opened if you buy and a short position is opened when you sell. Your position may change as you trade; for example, if you open a short by selling 10 ETH, but then buy 20 ETH, your short will become a long. Your loans are settled automatically when you close your position. If you close your position at a profit, the profit will be credited to your margin account; if you close at a loss, the amounts needed to settle your loans will be deducted from your margin account.

When you open a position, you will see something like this beneath the chart:

(Photo credit: www.poloniex.com)

• Position: Long or short.
• Amount: The net amount of the market's currency you have bought or sold. If your position is short, this value will be negative.
• Base Price: The approximate price at which you would need to close your position in order to break even.
• Est. Liquidation Price: The estimated highest bid (if your position is long) or lowest ask (if it is short) at which a forced liquidation will occur. Please note that this is only an estimate and has no bearing on when a forced liquidation will actually occur. The real price at which a forced liquidation will occur cannot be predicted with complete accuracy, as it depends, among other things, on the size and number of your open positions and orders, the current value of your collateral, and current market and order book conditions. See Margin Account to learn more about what determines the timing of a forced liquidation.
• Unrealized P/L: Estimated profit or loss you would incur if your position were closed. Includes lending fees already paid.
• Unrealized Lending Fees: The estimated value of outstanding fees on currently-open loans.
• Action: Click "Close" to close your position with a market order.

How to Margin Trade?

You can only start margin trading if your margin account is already funded. Borrowing is all handled automatically whenever you place a buy & sell order. The following are the things you need to know in margin trading.

There are two things which are different in Margin trading buy box compared to the one on the Exchange page. These are the Tradable balance and the Loan Rate field.

• The Tradable balance is the amount of funds currently available to you for trading.

• The Loan Rate field is where you specify the maximum daily interest rate you are willing to pay should your order open any new loans. Loans are always taken at the best available rate, so there is no harm in setting a value higher than the lowest rate offered. If no one is offering loans at or below the rate you specify, a trigger order will be placed instead of your margin order. When loans become available at your rate, the trigger order will grab it and place your margin order.

Remember importantly that even though you can specify your maximum loan rate when you place an order, you may end up with a higher rate if you keep an order or position open for more than two days. It is because your loans may expire after that amount of time and be transferred to new lenders at the best available rate.

In Margin Trading, trigger orders and stop limit orders may end up triggering at an amount less than the amount you specify. This is because your tradable balance varies continually with market and order book conditions and the status and number of your open orders and positions.

Once you have filled in all the fields, click Margin Buy or Margin Sell. Remember that you still incur interest fees on any loans used to place your order even if your order is not filled immediately.

Source: Poloniex.com

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