Important Things to Consider when Building a Margin Trading Exchange

Margin trading has gained significant popularity in the crypto market. Traders eager to make exponential profits on limited funds can opt for margin trading to increase their trading power and bid for positions that are considerably larger than the account balance they have. This, in turn, has led to a growing number of margin trading exchange platforms.

Let us comprehend margin trading

Let us understand margin trading with an example. Assume a trader has an account balance of 100 ETH and go for trading with 10X leverage. It means that the trade will be ten times larger than the trader’s account value. The leverage will allow them to open a position worth 1000 ETH. If the market is on the bull run, traders will be able to increase their profits ten times.

For communicating the leverage, there is a certain way i.e. 2X, 5X, 10X, 20X, and so on. 2X would mean twice the leverage of the margin amount will be available.

Understand liquidation

At this point, it is also important to understand liquidation, a mechanism designed to safeguard the exchange if the account balance of a trader goes too low. A liquidation margin depends on the deposit in a trader’s account as well as the most recent market value of its open positions. In such a case, the trader will face a margin call for getting their assets liquidated.

Integration of crypto exchange with margin trading

Owing to the ability of multiplied earnings, so many crypto traders are going for margin trading. To draw traders, several crypto exchange owners are integrating their crypto exchange with margin trading. This has led to a big-time increase in the income of traders as well as the exchange owners.

Role of a trading engine

It is important to fortify the exchange with a powerful trading engine to perform quick transactions with efficiency. The performance of a trading exchange is generally as good as the efficiency of the trading engine powering the transactions.

Along with a powerful trading engine, there should also be adequate risk management features to protect exchange owners as well as traders against losses.

Risk management features

• Auto deleveraging (ADL)

The system automatically liquidates traders’ positions if their account balance reaches the margin call threshold.

• Stop-loss/take profit

This is a key feature that enables traders to determine floor and ceiling values for an order, thus controlling the maximum losses they would face. The mechanism will automatically close the trade once it crosses the set limit.

• Partially close orders

Quite a useful feature for traders, it enables them to partially close their orders to garner profits when the market is bullish.

• Insurance Funds

The feature enables traders to shield their funds against auto deleveraging even in the cases when their positions drop below the maintenance margin amount.

• Security measures

In an exchange platform, where assets worth millions of traders move between accounts, thieves are always on the prowl. A margin trading exchange needs to have an advanced security mechanism to ascertain the security of the system as well as traders.

Crucial mechanisms for ensuring security include a safe transfer of funds (wallet security), multi-level authentication (system security), and high-level encryption (communication security).

Summing up

Margin trading enables the exchange owners and traders to amplify their earnings. Integrating margin trading on a crypto exchange pulls in more traders and helps exchanges to increase their trader base. The right set of security features safeguard all the parties on a crypto exchange.

If you are planning to build margin trading exchange software, Antier Solutions can help. We provide a highly-secure margin trading exchange platform with a robust risk management system.

Schedule a free demo of our white label margin trading solution or connect with our subject matter experts to share your needs for a custom margin trading exchange built from scratch.