1. Margin
The leverage principle of futures transactions is concentrated on the margin system of futures transactions that is, you do not need to pay 100% of the funds when you conduct futures transactions. You only need to invest a small amount of funds at a certain ratio according to the futures value as the collateral for the performance of the futures to participate, this fund is called margin.
- Leverage greatly improves the utilization of funds, and high returns are accompanied by high risks.
- The higher the leverage used by the trader, the lower the required margin.
2. Initial Margin
Initial Margin is the amount of collateral required to open a position for Leverage trading. The leverage used is directly related to the initial margin used to maintain the position. The higher the leverage, the lower the initial margin required.
To calculate the initial margin required for USDT Contracts, multiply the order value with the initial margin rate. The initial margin rate depends on the leverage used.
Initial Margin = Contract size x Entry Price / Leverage
Example:
Trader place a long entry of 1 BTC at USDT 10,000 with 50x leverage.
Initial Margin=(1x10,000)/50 =200 USDT
3. Maintenance Margin
Maintenance Margin is the minimum margin required to continue holding a position.
It will increase or decrease according to the trader's selected risk limit. By default, all risk limits start at the lowest maintenance margin level inside each trading pair's risk limit table.
Liquidation occurs when the isolated margin for the position is less than its maintenance margin level.