🤖Understanding TON Margin Trading

Introduction to Margin Trading

Types of Margin Trading

Margin trading in cryptocurrencies can be divided into two types:

• USD-Margin: In this type, traders use stablecoins like USDT as collateral.

• COIN-Margin: Here, cryptocurrencies like TON, NOT, and others are used as collateral instead of stablecoins.

Futures margin trading offers a unique and potentially lucrative way to trade. In this type of futures contract, the quote is based on the quote asset (such as USD), but the contract is denominated in another asset, which could be TON or NOT. This structure allows traders to earn amplified, nonlinear profits, making it attractive for those who have a strong understanding of market dynamics and risks. However, margin trading is not just for pros. At Storm Trade, we excel at simplifying the complex, making it accessible and understandable for everyone. Keep reading, and you might find yourself trading with the confidence of an expert.

The following sections explain coin-margin trading using TON as an example. These same principles apply when new tokens, like NOT, are added as collateral on Storm Trade.

Benefits of Margin Trading

• Crypto as Collateral: Use your TON (NOT) tokens directly as collateral. No hassle or fees for converting into stablecoins.

• Risk Mitigation: Avoid the unpredictability of stablecoin exchange rates. Hold TON (NOT) and trade with peace of mind.

• Strategic Hedging: Protect your portfolio from market downturns by shorting.

• Profit Amplification: Growth in the coin-margin market not only boosts your trading profits but also increases the value of your collateral. As the value of the asset rises, so does your position's profit, while your collateral also appreciates.

• Passive Income: Put your tokens to work. Join a liquidity pool and earn passive income while you trade.

• Increased Liquidity: As more liquidity providers favor TON, you benefit from higher market liquidity, allowing for larger trades with less impact on prices.

How It Works

Key Concepts

• Base Asset: In coin-margin trading, the base asset is typically the asset you are trading, such as TON. It is the primary asset of the trading pair.

• Quote Asset: This is usually a stable asset, like USD, against which the base asset is traded. The contract price is quoted in this asset. When calculating profits and losses, you typically reference the value to your quote asset.

• Settlement Asset: Uniquely, in margin trading with TON, the settlement asset can also be TON if you choose to denominate the contract in it. This means your margin, profits, and losses are all accounted for in TON.

Behind the Scenes

Let’s break it down with a formula:

PNL = Trade Direction * Margin * Entry Price * Leverage * (1 / Entry Price - 1 / Exit Price)

This formula can be broken down into the following components:

1. Trade Direction:

   • This indicates whether the trade is long or short.

   • For a long position (betting on a price increase), this value is 1.

   • For a short position (betting on a price decrease), this value is -1.

2. Margin:

   • This is the collateral that the trader puts into the trade. In this case, TON.

3. Entry Price:

   • The price of the asset (TON) when the trader enters the trade.

4. Leverage:

   • This is the factor by which the trader amplifies their exposure beyond their actual margin. Higher leverage means greater potential profits or losses.

5. 1 / Entry Price - 1 / Exit Price:

   • This part of the formula calculates the relative price change of the asset from entry to exit.

   • 1 / Entry Price gives the reciprocal of the entry price, and 1 / Exit Price gives the reciprocal of the exit price. The difference between these values reflects the proportional price change rather than just the absolute price difference.

6. Trading Fees:

   • The trading fee for coin-margin pairs is slightly higher than for USD-margin pairs but is much lower than standard spot market fees. The savings from avoiding exchanges between TON (NOT) and USDT make the 0.2% fee highly favorable, especially for long-term investments on the Storm Trade platform. The fee is calculated as follows:

   0.2% * (Margin * Leverage)

   When entering a position, your margin will be larger than at the close due to the initial opening fee deduction. For example, if a trader opens a position with a 100 TON margin and 10x leverage, the opening fee will be 0.2% of the margin and leverage, equaling 2 TON (0.2% * 1000 TON). Thus, the adjusted margin at the closing of the position will be slightly smaller due to the initial fee.

Here’s a more detailed breakdown of how your fees are calculated in coin-margin trading:

• Opening Fee Formula:

  Opening Fee = 0.2% * (Margin * Leverage)

• Adjusted Margin for Closing Fee: After deducting the initial opening fee, the adjusted margin for calculating the closing fee is as follows:

  Adjusted Margin = Margin - Opening Fee

• Closing Fee Formula:

  Closing Fee = 0.2% * (Adjusted Margin * Leverage)

For example, if you open a trade with a 100 TON margin and 10x leverage, and then close it, your fees would look like this:

• Opening Fee: 0.2% * (100 * 10) = 2 TON

• Adjusted Margin for Closing: 100 TON - 2 TON = 98 TON

• Closing Fee: 0.2% * (98 * 10) = 1.96 TON

Example:

Initial Data

• Trader: Sergey

• Trade Direction: Long position

• Position Size: 100 TON

• Entry Price: 2 USD

• Exit Price: 4 USD

• Leverage: x10

PnL Calculation

PnL = 1 * 100 * 2 * 10 * (1/2 - 1/4) = 2000 * 0.25 = 500 TON

Not bad? Sergey made an extra 500 TON, or 2000 USD, without exiting TON for a moment. Since his collateral doubled in value, Sergey now has 2400 USD in total wealth. Nice work, Sergey!

Coin-Margin Trading Dynamics

Short Position

• Price Decrease Scenario: If you open a short position and TON (NOT) decreases in value, your collateral decreases, but your PnL increases. This happens because the short position profits offset the collateral decline.

• Price Increase Scenario: If the price of TON (NOT) unexpectedly rises while in a short position, the increase in collateral value can help mitigate losses from the short position. However, high leverage increases the risk of liquidation.

Long Position

• Price Increase Scenario: If you open a long position and TON (NOT) rises in value, both your PnL and collateral increase, offering a double benefit in a bull market.

• Price Decrease Scenario: If TON (NOT) falls while in a long position, your collateral value decreases, potentially offsetting any profit from the long position. High leverage increases the risk of significant collateral loss in this scenario.

Risks and Tips for Mitigating Coin-Margin Trading

• Volatile Collateral: Price volatility works both ways. While it can boost profits, it also increases the risk of liquidation if the market moves against your position.

• Margin Ratio: The margin ratio depends on the price of the collateral coin. For example, with TON: margin ratio = nominal value * TON price. It’s essential to monitor this ratio closely. If TON’s price drops significantly, your position could face liquidation risk.

Conclusion

Margin trading on Storm Trade is an advanced trading mechanism that offers high potential rewards but also comes with increased risks due to the direct impact of collateral asset price volatility. Traders must clearly understand this dynamic and have a risk management strategy in place. Fortune favors the bold — but only if they read the fine print.