Intro to Margin Trading

Oct 05, 2017
What is Margin Trading?
How Do I Access Margin Trading?
Available Leverage
Placing a Margin Order
What is a Margin Position?
Managing your Margin Position
Position Size
Unrealized P/L
Margin Ratio
Call Price
Fees Due
Position Expires
Closing a Position
Settle
Realize Profit / Loss
Margin Call
Position Expires

 

What is Margin Trading?

Margin trading gives you access to additional funding from GDAX. These additional funds allow you to place larger orders and thereby multiply your gains or losses. Margin can also be used to sell (or “short”) assets which you do not hold.

 

The amount of margin funding you can access depends on:

  • The value of your balances for the order book on which you have enabled margin

  • The leverage available on that order book

  • Your margin funding limit

For example, the BTC/USD order book offers 3x leverage. This means that if the combined value of your BTC and USD balances is $100, you will have $300 of buying OR selling power on that order book. 
 

How Do I Access Margin Trading?

You can enable margin by clicking on the switch at the top of the trading panel. Note that web users can only access margin funding on one order book at a time.

If it is your first time accessing margin, you will also need to agree to the margin trading user terms. Users with access to USD order books must also certify that they are an ECP.

 

Once margin has been enabled, you will see your buying or selling power appear at the top of the trade panel.

 

Available Leverage

Market Leverage Margin Funding Limit
BTC/USD 3x $10,000
BTC/EUR 2x €3,000
ETH/USD 3x $10,000
LTC/USD 2x $500
 

Margin trading is not available on BTC/GBP at this time.

 

 

Placing a Margin Order

Just like a standard order on GDAX, a margin order consists of an order type, size, and price. The primary difference in placing a margin trade is that you can access additional funding beyond your current balance to place your order. When this occurs, you will see a negative balance for the amount of margin funding you have used.

 

Note that if you have sufficient funds for your order, you will not access additional funding and your order will be unleveraged. However, you will still enter a position.

 

Once you have placed an order (leveraged or not), your position info will be displayed in the position panel. The assets from your order will also be added to your balance, but you will be unable to withdraw until your position is closed.

 

 

What is a Margin Position?

A margin position is simply a way of tracking your profits and losses. When you buy bitcoin on the BTC/USD book, you are entering a long position on bitcoin. If you sell bitcoin, you are entering a short position.

 

You exit a position when you pay back any margin funding you have accessed and either realize your profit / loss or settle your position. You can read more about this below.

 

 

Managing your Margin Position

The position panel displays vital information about your position:


Position Size

This is the total amount that you are long or short. If you realize profits or losses, this is the amount that will be bought or sold in order to close your position.


Unrealized P/L

This represents how much profit or loss you will realize if you close your position at that moment. Your actual profit or loss upon closing may vary because closing your position involves executing market orders on a constantly changing order book.


Margin Ratio

Your margin ratio is defined as:

 

Margin ratio = Balance Value (i.e. equity) / Outstanding Margin Funding

 

If your margin ratio drops to or below the Maintenance Margin Requirement (MMR), you will be margin called. MMR varies according to the leverage of the order book:

  • 2x leverage order books = 66% MMR
  • 3x leverage order books = 33% MMR
Call Price

The call price is the price at which your margin ratio equals your MMR. If the price drops to or below your call price, you will be margin called.


Fees Due

This represents the margin funding fees that will be paid when your position is closed. At this time, we are charging no margin funding fees (0%).


Position Expires

Margin funding can remain outstanding for 27 days and 22 hours. This field will show you how much time remains before outstanding margin funding begins to be settled. See the section on ‘Position Expires’ for more information.

 

 

Closing a Position

The fastest way to exit a position and settle margin funding is to use the “close position” button in the position panel. There are two ways you can close your position.

Settle

This is the default behavior when closing a position. When you settle, you exit your position by executing only those trades necessary to settle your margin funding.

 

For example, if you are in a long position for 1 BTC on the BTC/USD order book, settling will sell only enough bitcoin to settle the USD margin funding which you have accessed. In other words, you will only sell enough bitcoin to bring your USD balance to $0.

 

If your position is profitable, the remaining BTC will simply remain in your BTC balance.

 

Realize Profit / Loss

When you realize profit / loss, the opposing market order will be executed for the entire size of your margin position.

 

Depending on your balances, an additional market order may be executed to fully settle outstanding funding.

 

For example, if you are in a long position for 1 BTC on the BTC/USD order book, realizing your profit or loss will execute a market sell order for 1 BTC. The proceeds will be used to settle margin funding and any remaining funds will be added to your balance in the form of the quote asset—in this case, USD.

Margin Call

If your margin ratio falls below your Maintenance Margin Requirement (MMR), you will be margin called and your position will be automatically closed. This means that the opposing trade for your position will be executed as market orders at the current rate, with all applicable trading fees. Any margin funding you have accessed will be settled. In some cases, this means that further assets from your balance will be sold on your behalf.

 

A Margin Call may be made without prior notice to you. It is your responsibility to monitor your margin ratio to ensure it does not fall below your MMR.

 

The price at which a margin call occurs is known as the call price. You can view your current call price, your margin ratio, and your MMR in the position panel.

 

Note: Depositing funds into the book on which margin is activated will increase your margin ratio and improve your call price.

 

 

Position Expires

Margin funding can remain outstanding for a maximum of 27 days and 22 hours. However, each portion of margin funding that you have accessed has its expiration tracked separately. This means that your entire position may not be closed when the first margin funding amount expires.

 

When a portion of your margin funding expires, a market order will be executed to settle only the amount that has expired, and the size of your position will be reduced. This will continue as each portion of margin funding expires until no further margin funding is outstanding. At that point, you may be left with an open but unleveraged position.

Still can't find what you're looking for?

Submit A Request