Margin Trading refers to the practice of using borrowed funds from other users of a platform to trade and not using ours. To do this, we use the so-called Margin Account. This account acts as a collateral for lenders in case an investor's trade ends up with a loss. Lenders must ensure that the investor can cover any losses from a position, so a minimum guarantee is required to be deposited in the Margin Account.
When we borrow money and make a trade, it means that we open a "position". If we buy a coin, then we open "Long Position", and if we make a sell then we open "Short Sell" or "Short Position".
• Long Position is the position taken by the investors buying a coin for investment or speculation. The investors taking a long position estimate that the price of the coin will rise in the future, so they will sell it and close the position with profits.
• Short Selling is a technique used by investors to gain from the fall in the price of a coin. Investors are borrowing coins that they do not own from other investors, they sell them, and at a later time they will be forced to buy them again to return them to the lender. The lenders have no risk, because they will take back their coins plus a small return for the duration they have lent. The short seller (bear) hopes to gain from the fall in the coin price, taking advantage of the price difference between the date of purchase and sale. Coin prices can go up / down indefinitely but the investors are obliged to return the coins they borrowed at any price they can buy. Therefore the losses can be huge, so short selling is a very risky technique. The act of repurchasing the coins sold openly is called cover/close position. A short position may be closed at any time until the final return date.
The margin call occurs when the balance of an investor's margins account is insufficient to cover open positions. When the investor's balance falls and reaches its marginal position, the platform will call them to either fill their position by depositing more money, or if they do not respond, the platform will close their position automatically. The purpose of this procedure is all sides to be secured.