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Both Margin and Futures are trading methods on Binance which provide users with leverage to increase their profits. However, their operating mechanisms still have certain differences.
What is Margin?
Margin is a method of trading assets via borrowing funds. It allows users to leverage their positions so that they can boost your purchasing power and make greater investments. Margin accounts have higher positions than regular accounts. In cryptocurrency market, funds are provided by a third party – other traders.
>>> For more information about Binance Margin, read this article here.
What are Futures?
Futures is a Binance platform for investors to buy and sell cryptocurrencies at a predetermined price in the future. You will make a profit by placing orders, taking the advantages of the ups and downs of the currency price for a certain period of time.
>>> To get a better grasp of Binance Futures, click this link.
Similarities between Margin and Futures on Binance
Advantage
- Both Margin and Futures use leverage. The leverage shows how many times your initial capital is multiplied when comparing to the Spot market.
- Two-way profit , when the market is up or down. Profits increase if you correctly guess the trend of the market.
- Diversifying portfolios with capital does not need to be too large.
- When opening a position, the Cross or Isolate:
– Cross: The position will automatically use all balances in Margin/Futures account to limit account burnout. For example, you open an order with $100 and your account balance has $1,000. When the position is at risk, it deducts itself to $1,000 and the order is only liquidated until your funds in the account runs out.
– Isolated: Limit the amount of currency in the position. This avoids the risk of dead losses. For example, you open position you with $200. If you are at risk, only burn $200 and do not cause damage to the balance in the account.
Disadvantages
- The high risk: The higher your leverage, the more your funds are liquidated.
- It is easy to manipulate the price, causing the account to be liquidated quickly.
Differences between Margin and Futures on Binance
| Margin | Futures | |
| Leverage | Binance stipulates a certain level of leverage that cannot be changed for each coin. Up to x10 | You can change within the maximum x125 allowed limit |
| Deposit | It is possible to transfer any stablecoin, altcoin, or Bitcoin to trading | Stablecoin transfer and withdrawal are only allowed |
| Market | Spot market. Volatility is based on orders in the Spot market. | Derivatives market. Volatility is simulated based on the Spot market but there will be significant disparities. The figure is calculated based on the futures contracts of the buy and sell-side. |
| Transaction fees | The fee is usually similar to the Spot market (from 0.075%). The interest rate is not fixed, depending on the coins and depending on different time. | The fee is calculated based on the leverage ratio, the more you borrow, the higher the charge. This fee can rise as high as 0.5% when the market is highly volatile. Users may have to pay three times a day. |
| Level of risk | Less risky than futures. | The risk is greater than the margin. |
>>> Related: Complete guide to sign up for Binance
