Huobi Pro is a world famous Bitcoin and Cryptocurrency exchange where you can trade Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Bitcoin Cash (BCH), Ethereum Classic (ETC) or more exotic Crypto-Assets such as Nebulas (NAS) or QTUM (please beware of changing regulation on token securities and ICOs, USA SEC, Switzerland FINMA). Huobi.pro also allows margin trading(long/short).
What is margin trading?
From Investopedia: “Margin trading refers to the practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan from the broker. Since such use of financial leverage can potentially magnify gains but could also saddle the trader with devastating losses, leverage has the well-deserved reputation of being a double-edged sword.”
The key points of the above description are “financial leverage” and “borrowed funds”. Thanks to margin trading services offered by brokers or exchanges, traders are allowed to multiply their “financial power” while betting on the future price of a cryptocurrency or other assets. “Going Long” (Long Position) means betting on a future increase in the price of a cryptocurrency. On the contrary “Going Short” (Short Position) means betting on the future decrease in the price of a cryptocurrency.
For example, if a trader wants to short Litecoin, he can borrow more litecoins, sell them today (e.g. 10 LTC, price 160$, Tot 1600$), wait until tomorrow for a lower price (e.g. 120$), then buy litcoins again and repay the loan (e.g. 10LTC*120$=1200$) while making a profit from the price spread (1600$-1200$= 400$ profit; the trader will have to pay an interest to the lender).
A trader going long would borrow litecoins at a low price and then sell them at an higher price, making a profit from the price difference. Please use this links to better understand how margin trading works on a cryptocurrency exchange.
Usually margin trading is conducted by professional traders, especially when the long/short positions are highly leveraged (e.g. 10:1 or even 100:1). For example, holding a long position leveraged 10:1 means that a 10% decrease in the price of the asset would destroy the collateral used to create such long position, leaving the trader almost without any asset.
For this reason and for the extreme intrinsic volatility of the cryptocurrency markets, services of margin trading and “asset borrowing&lending” are provided only by a small group of institutions. Notably, brokers such as Plus500 and AVAtrade (CFDs) enable margin trading services on some major cryptocurrency (Ripple, Ethereum, Litecoin and more). Among the major exchanges that provide margin trading services figure Kraken (5:1), Bitfinex (3:1), Poloniex (2.5:1), BitMEX (~100:1), Huobi Pro (3:1) and some others.
Margin trading on Huobi Pro looks really safe.
Since January 26 Huobi Pro provides BTC and USDT trading pairs in its margin accounts (ETH coming soon), For example you can long or short the following coins paired against BTC: ETH, BCH, XRP, LTC, DASH, EOS, ETC, OMG, ZEC, QTUM, HSR, etc…
Given Huobi’s high volume of trades, its history, its new “Security Reserve” and “Huobi User Protection Fund”, the Singapore-based exchange is uniquely positioned to provide margin trading opportunities to its customers who can now trade with less worries about the solvency and the risk management mechanisms of the exchange.
Huobi Pro present a daily interest of 0.1% for USDT loans, 0.02% for other the cryptocurrencies and more than 40 trading pairs available.
Please be very careful while margin trading, a great loss of capital may be created by a small price movement and users may be even forced into liquidation to prevent further losses!
Please use these links to have an insight on how margin trading works on Huobi Pro:
(https://huobiglobal.zendesk.com/hc/en-us/articles/360000077812-Margin-Trading-Tutorial)
(https://huobiglobal.zendesk.com/hc/en-us/articles/360000077872-Margin-Trading-Instruction)