The economy is based and dependant on many different things. Fundamentally a very important pillar of this is trading. Trading is a basic economic concept, involving the buying and selling of goods or services between 2 parties, where the buyer pays for the compensation by the seller. Normally this is initiated by the buyer to cover demand for a product. From trading with seashells, the Romans using salt as a currency to leaving the gold standard for a FIAT system, over the history of mankind trading has taken many forms and has evolved a lot. Yet the core principle, of exchanging perceived value for goods, stayed the same.
In current financial markets, trading refers to the buying and selling of assets such as:
» stocks » bonds » currencies » commodities » options » futures » margin products » and others
Often this is only possible in a strictly centrally controlled environment such as exchanges or banks. They fully control the rules and laws within this system, usually benefitting only the bigger players with bigger discounts and privileges. Those institutions have a central point of failure.
The creation of Bitcoin took the financial system another step forward. Bitcoin is a response to the lack of trust people had when they used the centralized financial entities. Bitcoin provides a system controlled by all users, permissionless and peer-to-peer with all its rules written in code. Bitcoin has no leader, answers to no government or regulator. It is the perfect reserve asset on which SOVRYN is building the new financial operating system.
SOVRYN is equipping Bitcoin with a decentralized financial system via a decentralized exchange, putting users in full control of their funds. By offering native non-custodial trading and lending of BTC. SOVRYN provides users the opportunity to trade in a permissionless, noncustodial, and censorship-resistant way.
One thing must be very clear, trading on SOVRYN is equal to everyone. There are no extra fee discounts after you have traded a huge amount. The protocol does not provide certain people with more rights than others. Everybody has the same and equal opportunities on SOVRYN.
When you swap you simply trade one asset (X) for another asset (Y). To do this you enter the amount of the asset (X) you want to provide in the trade. The Automated Market Maker (AMM) will calculate for you the amount of the asset (Y) you want to receive, minus a small transaction fee for the service the platform is providing. You may have noted that in this way there is no order book where you can pro-actively enter a trade. This is due to the way the AMM works to ensure decentralization and no central control taking advantage of you creating a trade. Currently, there are many people in this industry working on a way to still implement an opportunity to allow the creation of limit orders on the AMM.
Margin trading is a more sophisticated form of trading. Margin trading allows you to buy more assets than you would be able to normally. You use assets in your wallet as collateral for your margin, to borrow more assets or to increase your initial position. For this loan, you need to pay interest, as somebody is providing these assets for you to use and the platform is facilitating this. The interest paid will differ with market movements and it is therefore important to always check the current interest %. You can keep your position open as long as your collateral is higher than the accumulated loss on the amplified position.
Leverage is the amount you amplify your margin with. When you use 4x leverage you increase your initial margin by four times which provides you with a position 4x larger than you normally could. As a result of the increased position, the gains or losses are also amplified by your chosen leverage. This is very beneficial when the market moves according to your expectations as your profit is multiplied. However, if the market is turning against you, your losses will also be multiplied. When this is happening it is important that you will be able to repay your debt for the initiative taken loan. Therefore the system uses something called maintenance margin. This is the minimum account balance (margin) you must maintain before you are forced to deposit more funds into the position or sell the bought assets to pay down your loan. For every margin position, there is a defined price when this will happen and it is called the liquidation price. When the liquidation price is reached the system will automatically sell your position at a loss to protect you against being unable to repay your loan. As you can see, margin trading is very delicate and has the potential for increased profits and losses.
When you are about to margin trade you have the possibility to take a position where you anticipate an increase in price or a take position where you expect a decrease in price. For both positions you are able to take a leveraged position.
When you expect an increase in price you open a long position. You can increase your position by taking a higher leverage. The system does this by borrowing assets automatically. Once you are satisfied with the amount of profit your trade has taken you can close your position. The system automatically repays your debt plus interest and you enjoy your gains. It is important to note that if the price moves against you, you will enter at a loss as you have to repay your loan at the original value.
When you expect a fall in price, you can take a short position (in a short position you basically sell and not buy, contrary to a long position). You can increase your position by taking a higher leverage. The system does this by borrowing assets automatically. The system then sells the assets and when you are satisfied with the price decrease, you can close your position. The system rebuys your original amount of borrowed assets and pays back the amount borrowed plus interests. The difference is what you gain as profit. It is important to note that if the price moves against you, you will enter at a loss as you have to rebuy the assets at a higher price to repay your loan.
The following step-by-step guide will walk you through the process of swapping from one toke to another on the Sovryn platform.
After the swapping from the previous step, you will be prompted by your wallet to perform approval and confirmation.
In this guide, you will learn how to perform leveraged trades on the SOVRYN dApp.
You will get a pop-up with a summary of the entries you made and the maintenance margin, plus the estimated liquidation price shown. Take good note of this as it is important for the success of your trade. Once satisfied with the entries made before, continue with the CONFIRM button.
After the performing of the margin trade from the previous step, you will be prompted by your wallet to perform approval and confirmation.
See the new position detail under Open Positions. Sometimes this is not directly visible and that is quickly solved by refreshing your page.
The information shown here provides the following details about the trade: