What is Crypto Margin Trading?
KuCoin Margin trading allows eligible users to borrow funds to amplify their profits. Seasoned traders could use assets as collateral to borrow funds and open larger positions than they could with their capital alone. Margin trading can increase profits from successful trades but also comes with heightened risks as losses can be amplified. Whether you're going long (buying) or short (selling), you should do due diligence and understand the pros and cons of margin trading.
Before we start, here’s a quick video tutorial to help you understand cryptocurrency margin trading on the KuCoin exchange:
Table of Contents
1. Understanding Cross and Isolated Margin
2. Borrowing and Interest on KuCoin Margin Trading
3. Long and Short Strategies Explained
4. Monitoring Debt Ratio and Repayment
5. Benefits and Risks of Margin Trading
6. Is Margin Trading Right for You?
1. Understanding Cross and Isolated Margin
The KuCoin margin trading platform supports cross margin and isolated margin modes.
1.1 Cross Margin
Cross margin means that all assets (regardless of type) in the margin account will be used as collateral to improve capital utilization and prevent liquidation. The advantage of cross margin is that it removes the need to replace tokens currently held in order to borrow other types. All tokens supported by cross margin can be transferred to and used by the cross margin account. The entire cross margin account is treated as a single position with a shared debt ratio. Cross margin currently supports up to 5x leverage.
1.2 Isolated Margin
Each isolated margin trading pair has its own independent isolated margin account in Isolated Margin. Trades, risks, and debt ratio calculations are independent of one another. Only the two coins corresponding to the trading pair can be transferred, held, or borrowed in a specific isolated margin account. The advantage of isolated margin is the isolation of risk. Any risks of liquidation will not influence other isolated margin accounts. Isolated margin currently supports up to 10x leverage. However, the maximum leverage also differs depending on the trading pair.
Cross Margin vs. Isolated Margin
Cross margin involves a shared account and risk, while isolated margin maintains separate accounts for each trading pair, isolating risks and calculations.
| Feature | Cross Margin | Isolated Margin |
| Account | Single account for all trading pairs. | Separate accounts for each trading pair. |
| Margin | All assets are collectively used as collateral. | Only assets of the specific trading pair are used. |
| Debt Ratio | A single debt ratio is calculated based on all assets and liabilities under the cross margin account | The debt ratio of each isolated margin account is independent of the others. It is calculated based on the assets and liabilities in the specific isolated account. You must manually modify the different isolated accounts to adjust the debt ratio. |
| Risk | You will be automatically requested to increase the margin or close the position depending on the overall risk level of the cross margin account. Once liquidation is triggered, all assets under the account may be liquidated. | The risk for each isolated margin account is independent of one another. No other account will be affected, even when one account is at high risk of liquidation. |
2. Borrowing and Interest on KuCoin Margin Trading
2.1 Borrowing
2.1.1 Amount of Borrowable Assets
In cross margin mode, the borrower has a maximum leverage of 5x, and the maximum borrowable assets is 4x the total assets in the cross margin account. If a user holds 10 USDT in a cross margin account, they may borrow up to 40 USDT, increasing their available funds to 50 USDT. You may borrow multiple coins. For example, you may hold BTC in your cross margin account and borrow other coins such as USDT, ETH, and LUNA. Users can choose to manually repay loans at any time before the due date.
In isolated margin mode, the maximum leverage differs depending on the trading pair to a maximum of 10x. Using 10x leverage as an example, the maximum borrowable assets is 9x the total assets in the specific isolated margin account. If a user holds 10 USDT in a BTC/USDT isolated margin account, they may borrow up to 90 USDT, increasing their available funds to 100 USDT. This isolated margin account can only borrow BTC to go short or USDT to go long. It cannot be used to borrow other coins.
2.1.2 Borrowing Method
There are two different margin loan methods, namely Manual Borrow and Auto-Borrow.
- Manual Borrow: The user borrows assets first, then makes a trade. The user must manually borrow assets from the B2C lending market before they can trade.
- Auto-Borrow: The system automatically borrows assets when a user places an order. The user only needs to configure their leverage multiple. When the user places an order, the system will automatically borrow the amount required for the trade. Order placement and borrowing are executed at the same time. Users can toggle this function in accordance with their trading needs.
2.2 Interest
Interest is calculated by Principal, Daily Interest Rate, and Actual borrow time. You can check the Interest Records on the "Orders"--"Margin Orders"--"Cross Margin/Isolated Margin Interest" page as shown below.
Interest Calculation Method
Loan interest will be charged hourly according to market supply and demand changes. For details, please refer to Interest Calculation. At the same time, a more stable capital scale will be provided for Margin Borrowing, and the Margin Trading process will remain unchanged.
Interest repayment
The repayment can be completed through the Margin Trading interface.
Interest sharing
The platform will charge 5% of your accrued interest as fees and 10% as the insurance fund.
3. Long and Short Strategies Explained
- Buying Long: Buy low and sell high, profiting when the market rises. Using BTC/USDT as an example, if the user believes the BTC is about to rise, they can go long by borrowing USDT to buy BTC. Once BTC rises, they sell their BTC and repay their USDT liabilities, with the remaining assets serving as their profit.
- Selling Short: Sell high and buy low, profiting when the market falls. Using BTC/USDT as an example, if the user believes the BTC is about to fall, they can go short by borrowing BTC to sell. Once BTC falls, they buy enough BTC to repay their BTC liabilities, with the remaining assets serving as their profit.
4. Monitoring Debt Ratio and Repayment
4.1 Debt Ratio
If the user does not borrow any digital assets, the debt ratio is 0%. When the user borrows a number of digital assets, the system will calculate the debt ratio based on the user's principal, borrowed assets, and interest. The calculation is as follows:
Debt Ratio= Account liabilities/Account assets
Account liabilities=Borrowed assets + Accrued interest=sum(whole borrowed assets*mark price)+sum(Accrued interest for all borrowed assets*mark price)
Account assets=sum(whole holding assets*mark price)
The Debt Ratio will be refreshed every second. When the user's debt ratio reaches 90%, the user's account will trigger a warning, and KuCoin will send an email warning to the user based on the security settings. A forced liquidation will be triggered when the debt ratio reaches 97%. You may obtain the current debt ratio data on the margin account page and margin trading page, regardless of whether you visit our website or use our app.
| Margin Modes | Leverage Multiples | Initial Debt Ratio of Full Leverage (except interests) | Debt Ratio of Alert | Debt Ratio of Forced Liquidation | Debt Ratio of Transfer-out |
| Cross Margin | 1-5 times | 80% | 95% | 97% | lower than 60% |
| Isolated Margin | 1-10 times | 90% | 95% | 97% | lower than 60% |
Note: You can only transfer part of your funds from the margin account if the Debt Ratio is lower than 60%. The lower the debt ratio, the larger the transferable amount. If you'd like to transfer all your funds, kindly check the liabilities on your margin assets page and repay all the loans first.
Low Risk: ≤60% debt ratio; Medium Risk: 60%-85% debt ratio; High Risk: >85% debt ratio.
Reducing the debt ratio to lower risk
-
Transfer more assets from other accounts to the margin account.
-
Repay a portion of your debt in advance.
4.2 Repayment
4.2.1 Viewing Liabilities
The tokens you borrow are the tokens you have to repay. You cannot use another token to repay a loan. For example, USDT liabilities must be repaid in USDT, while BTC liabilities must be repaid in BTC. When repaying a loan, ensure that the margin account has a sufficient amount of the corresponding tokens.
Liabilities payable = Borrowed assets + Accrued interest.
You can view cross and isolated liabilities through the Margin Account page.
4.2.2 Repayment Method
The borrower can choose to manually repay loans at any time before the due date. Interest is calculated on an hourly basis in accordance with the actual usage time.
- Interest Calculation: Lending hourly interest rates are calculated dynamically each hour based on capital and liquidity conditions. Interest is also calculated and paid each hour.
- Auto Repay: The auto-repay function is optimized so that once the user sells assets via the auto-repay function, the assets received will be used to repay the liabilities only if there are any corresponding liabilities.
5. Benefits and Risks of Margin Trading
5.1 Advantages
Margin Trading vs. Spot Trading
| Leverage | Profit Model | |
| Margin Trading |
1. Borrow USDT or other coins to magnify trades. 2. Supports up to 10x leverage. |
Go long/short to earn profits in rising or falling markets. |
| Spot Trading | Trade only with held assets. | Does not support going short. |
Margin Trading vs. Futures Trading
| Capital Utilization | Leverage | Risk Ratio | |
| Margin Trading |
1. Borrow USDT or other coins. 2. Margin is shared across coins. All supported coins can be transferred to the cross margin account as collateral. 3. Supports more coins. |
1-10x |
Medium risk. Less risk exposure. |
| Futures Trading | Each position is independent. Collateral is not shared. | 1-100x | High risk. |
5.2 Risks
5.2.1 Forced Liquidation and Dealt
Liquidation: A forced liquidation will be triggered when the mark price of your holding assets and debt assets changes, resulting in the debt ratio reaching 97%. All the assets you hold in the margin account will be sold as the debt assets to repay all the debts.
When the debt ratio in the margin account reaches the Debt Ratio of Forced Liquidation (97%), forced liquidation is triggered.
When the liquidation is triggered:
2.1 Liquidation Notification
According to your account settings, there will be an Email + Account notification if you open the app or website version account.
2.2 Operation Limitation
A. All margin trading pairs are not allowed to place orders (in any form);
B. All open orders in margin trading will be automatically canceled by the system;
C. No token can be transferred into the margin account during the period when the margin account is operating force liquidation.
After the forced liquidation, the system will take over the positions to close and repay the debts. If there are residual balances, one small part of fees (about 1% of the total positions’ value) will be charged to protect against the risks of negative balances; the others will be returned to users’ accounts in USDT or liquidated tokens.
5.2.2 Risk Warning
Please pay attention to the risks of Margin trading and adjust the positions in time to avoid losses and risks. All losses caused by the forced liquidation shall be borne by the user, including but not limited: due to the sharp fluctuations in the price of digital assets, the debt ratio in the Margin account quickly reached the liquidation line (97%) so that users failed to take corresponding measures in time after receiving the prompt information sent by the system.
6. Is Margin Trading Right for You?
Margin trading is ideal for the following users on the KuCoin platform:
- Institutional or seasoned traders
- Spot trading enthusiasts seeking leveraged profits
- API quantitative trading users
- Risk-tolerant investors
- Cryptocurrency miners
The margin trading strategy is ideal for experienced traders, institutions, and those comfortable with higher risks. KuCoin advises setting stop-loss and take-profit orders to manage risks effectively.
Remember: Margin trading carries risks. Please be aware and adjust your positions timely to avoid losses. Any losses from forced liquidation are your responsibility. This includes situations where sharp price fluctuations in digital assets quickly push your Margin account's debt ratio to the liquidation line (97%), and you fail to take appropriate action after receiving the system's prompt.
With knowledge and caution, you can unlock the immense potential of KuCoin Margin Trading and take your crypto journey to the next level.