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Margin Trading Overview
An overview of Margin Trading at Sifchain and how traders can borrow funds from Sifchain's Liquidity Pools while paying interest back to the Liquidity Providers.
Margin trading means a trader can borrow funds to increase their total trade size, which allows the trader to enter into positions that are larger than their initial collateral. This amplifies both profit potential and risk.
For example, if a trader has 100 of USDC in their trading account, the trader could choose to open a 300 USDC trade, or 3x leverage off of their 100 USDC. They do this by borrowing the additional 200 USDC from the liquidity pool, making their total position size 300 USDC.
Traders are able to open long or short positions based on what they think will happen to their target asset, in relation to another asset. If they place a 'long' trade, it means that they think that the asset they are going long on will go up in price vs. the other specified asset. If they 'short', it means that they think that the asset will go down in price.
Welcome to DeFi with real revenue. Liquidity providers provide liquidity, that liquidity funds margin positions, and these liquidity providers get paid interest. This non-inflationary revenue gets amplified as more people partake in the system of providing liquidity & margin positions.
Refer to the below documentation for details on Sifchain’s Margin Trading solution.
- Implementation specification for current Margin Trading Implementation: https://hackmd.io/M4y3-r1wTre6zQ4HX8R0Qg
- Suggested user journey of this document:
- 1.Look at the State tables
- 2.Go to Open MTP long
- 3.Go to the health checks
- To see what is included in the current deployed version of Margin, pay attention to the tags.
- tags v1.0 = current implementation
- This will continue to evolve and grow.
Monetary Policies are key to Sifchain’s Margin Trading solution, and the ability to enter into this new innovative era of DeFi. These mechanisms aim to keep the system in balance and encourage behavior that benefits the system as a whole.
Refer to the below documentation for details on Sifchain’s current Monetary Policy suite of tools: