Can I end up owing money margin trading?
I want to try shorting a coin, my question is if I transfer 100 usdt to my margin account, are my potential looses limited to 100usdt, or can I end up with a negative balance?
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on binance, no. you cannot end up owing money, they’ll first provide you the opportunity to retain your position with a margin call, then they’ll liquidate you.
more broadly speaking, you absolutely can end up owing money when messing around with margin trading, especially if leveraged.
If you only put in 100 USDT in to your margin account, that’s the max you can lose.
Hello there! Thank you for reaching us on Reddit! If your question is related to margin trading and you use single asset mode – you won’t lose more than the initial margin. But if your question is related to Futures trading, you might end up with a negative balance in some cases. But you can learn more about margin trading by checking this link [https://academy.binance.com/en/articles/what-is-margin-trading](https://academy.binance.com/en/articles/what-is-margin-trading). If you have more questions or fi you face any kind of issue, please do not hesitate to contact our customer support team through live chat [http://binance.com/en/chat](http://binance.com/en/chat). Our team will be there for you and help you out. You may also share your case ID with us if you require any extra assistance. Thank you. ^AE
It depends on the brokerage, I’m not sure for Binance.
However in general it’s definitely possible. It’s like what happens when being “underwater” on a vehicle or home loan but usually worse because those kind of loans are regulated differently.
With leverage you’re borrowing money to buy stocks, bonds, crypto, whatever.
If the underlying collateral (the asset you purchased with borrowed money) is worth a lot less than the loan you took out, then the folks who loaned you the money can require you liquidate and pay the difference.
Generally in trading this manifests as something called “margin call” where the brokerage offers you a chance to add more money to your account to cover their collateral requirements. If you can’t satisfy that, then they liquidate the asset and take whatever money back they can.
It’s possible that when they liquidate you owe them the difference in the asset price vs. what they originally loaned you. So, how low can the asset go before liquidation is triggered? That’s how much you might have to pay.
For a simplified, but concrete, example: suppose you throw down 100 dollars of your own money and are given 10x leverage. That means you’re allowed to trade with 900 dollars on loan. You purchase 1000 dollars of cryptocurrency FOOBAR. Your 100 + the 900 you were loaned was used to purchase that asset.
Whoops, it was found out that FOOBAR lost a partnership everyone thought they’d get. It’s now worth 90% of what it was worth when you bought it.
You now own 900 dollars of FOOBAR, but still owe 900 dollars on your loan. The brokerage might force you to liquidate so they can be sure to get their money back. If that happens you’re out your 100 dollars you threw down. But you can walk away without owing more.
The brokerage didn’t liquidate though, for some reason. Now two weeks later FOOBAR is worth 800 dollars. The problem now is you still owe that 900 dollar loan, but you only have 800 dollars worth of FOOBAR to cover it. So effectively you’re now in the hole 100 more dollars–you already lost the 100 you threw down.
Again, you’re being loaned money. It’s not yours, you are allowed to use it subject to the contract you signed with the folks loaning you money.
What happens is up to the contract you sign when getting the loan but you can absolutely owe more than what you threw into the pot if you’re using leverage.