Margin trading is a financial investment technique where the trader has to put down a percentage of their own money as collateral/reserved funds. In margin trading, if the market value of the trader’s capital falls below the amount required by the broker or exchange, a margin call occurs and it requires additional funds from the investor to meet the maintenance (replenishment) requirement. Margin trading with cryptocurrency allows traders to trade cryptocurrency on the margin on an exchange. In this post, you will learn how to configure margin calls in the Royal Q bot.
What is a margin call?
When a margin call is triggered in margin trading with cryptocurrencies, if the cryptocurrency loses value and falls below a pre-specified minimum value, the exchange will ask for additional funds to be deposited. Many brokers and exchanges allow for partial margin trading to provide investors with some protection against margin call risk.
What does margin trading mean for crypto traders?
Until now, cryptocurrency exchanges or traders always had to put down the full value of the cryptocurrency as collateral and a margin is basically a small amount of money to avoid a margin call. Due to the lack of liquidity in cryptocurrency markets, it would be quite risky for investors to put down as much capital as the requirement for a margin call. With margin trading, traders are able to keep more collateral as they are investing on the margin and reduce the risk of margin calls if the value of the cryptocurrency market goes down.
Margin Calls and Crypto Trading
In a normal margin call scenario, the trader has to “pull” more capital from his or her brokerage account (wallet) to meet the balance requirement of the call. All it requires is that the investor keeps the same total amount of money in the trading account. If the investment increases in value, or at all, the trader does not need to take additional funds from their trading account to meet margin requirements.
Description of margin call configuration in Royal Q
When setting up the position call configuration parameters, it will be displayed according to the number of times you set up the position, and you can set the position call drop and the position call multiple.
Margin call drop: When it falls to the percentage of the drop-out, the function of tracking cover-up will be turned on.
Margin call multiple: When the replenishment price is reached, the amount of the first order will be multiplied by the multiple.
First call: Set the down ratio of the first call for the position.
2nd call: the fall ratio setting for the second position call.
Margin calls configuration in the Royal Q bot (bounded to either Binance or Huobi) requires that you have made proper trading settings. Read the following post to understand how to make trading settings for profitable crypto trading.