Demystifying Binance‘s Margin Trading Quiz

Binance Margin includes cross margin and isolated margin. Which one of the following sentences does not describe their difference?

• In isolated margin, borrowing, trading, and risk management functions are included in an independent isolated margin account, while in cross margin, each user can only open one cross margin account where borrowing, trading, and risk management functions are available.

• They have different interest rates

• They have different maximum leverage ratio

• They support different borrowables

Explanation: The key differences between isolated vs cross margin accounts on Binance lie primarily in interest rates, maximum leverage allowed, and isolated protection against liquidations. However, both allow borrowing the same cryptocurrencies.

Margin level is used to evaluate the risk level of your margin account. How is margin level calculated?

• Margin level = total assets value/(total borrowed value – total accrued interest value)

• Margin level = total borrowed value/ total accrued interest value

• Margin level = total assets value/(total borrowed value + total accrued interest value)

Explanation: Your margin level compares your total account equity against funds borrowed plus interest accrued. This gives a clear view into the overall collateralization and liquidation risk, with 100% meaning assets cover debt 1:1.

Which one of the following events will force you to liquidate?

• The margin level has reached the initial margin level

• The total debt is lower than the total interest

• The margin level has reached the liquidation level

Explanation: Exchanges like Binance have set margin levels that trigger automatic liquidations. This protects them against potential defaults. Traders must monitor margin levels closely to avoid costly liquidations.

How often is margin interest calculated?

• Daily

• Monthly

• Hourly, at the time of borrowing

Explanation: One key difference vs traditional financing is crypto margin interest accrues by the hour, making borrow costs potentially quite high during volatile periods.

Do you need to borrow manually before trading?

• Yes

• No, you can use the “auto borrow” function on the trading page.

Explanation: Binance does allow automatic borrowing against margin collateral directly on trade execution, sparing traders from manual loan transactions.

Which one of the following factors does not affect your maximum borrowing limit?

• Your VIP level

• Your individual borrowing limit

• The borrowing period

• The amount of fund in your margin account

• The system borrowing limit

• The borrowing period

Explanation: Unlike credit lines, max margin borrowing power relates to current collateral and VIP status – not a duration constraint. Market conditions impact rates not limits.

Which one of the following sentences is correct regarding your borrowing interest rate?

• The borrowing interest rate will be determined at the time of borrowing, no changes afterward

• The borrowing interest rate will change with the market, and the system will notify you when it changes

Explanation: Volatile crypto markets mean margin rates adjust frequently based on supply/demand – so interest costs float over time rather than lock-in.

In the event of liquidation, how to repay your debts?

• You are required to repay the debts yourself

• Binance insurance funds will write off your debts

Explanation: Make no mistake – traders are fully responsible for all losses and debts when margin positions are liquidated. There are no "bailouts" so caution is warranted.

How to pay the interest fee with BNB in cross margin?

• Transfer BNB to cross margin account and repay manually

• Repay with the loan

Explanation: BNB holders receive discounted interest rates. However, you must hold actual BNB (not borrowed) in the margin account and manually repay interest to get this benefit.

When you receive a margin call notification, what should you do?

• Borrow more funds to hedge the risk

• Do nothing

• Reduce your position to repay the debt or add more collateral into the margin account

Explanation: Margin calls mean you are at risk of liquidation. You must either close positions to deleverage or add more funds immediately to meet requirements.

When trading on Margin, a forced liquidation occurs when the margin risk ratio (total assets/total debts) reaches the liquidation risk ratio. Users are charged a “Liquidation Clearance Fee” in the event of forced liquidation. Which of the following contains the correct description for Liquidation Clearance Fees?

• The Liquidation Clearance Fee is a fixed value for each liquidation.

• When the position is forcedly liquidated, the user will only be charged with commission fees of liquidation orders and does not need to pay additional “Liquidation Clearance Fees”

• When the position is forcedly liquidated, a Liquidation Clearance Fee will be charged according to the amount of the assets being liquidated. The system may use all the remaining assets in the margin wallet to complete the liquidation.

Explanation: Binance tacks on an additional fee during forced liquidations – further penalizing traders in trouble spots but reimbursing some losses. Watch margin levels!

When the margin risk ratio (total assets/total debts) of your margin wallet reaches liquidation risk ratio, which one of the following best describes what will happen?

• When your margin wallet is under liquidation, you will not be able to trade with this wallet.

• The system will automatically sell your assets to repay your debts.

• You will be charged a liquidation clearance fee according to the amount of assets being liquidated.

• All of the above.

Explanation: Liquidations restrict account access, close positions forcibly, charge clearance fees automatically – a triple whammy for overwhelmed traders.