What is maintenance margin
Maintenance margin refers to the minimum amount required to maintain an existing position. When trading contracts, the minimum margin balance required in the user's account. When the account balance falls below this level, the user's position may be forced to close.
The importance of maintenance margin
The setting of maintenance margin is intended to protect exchanges and other traders from possible losses. When the market price is not favorable to the position holder, if the account margin is not enough to maintain the position (Margin balance ≤ Maintenance margin, that is, current maintenance margin ratio ≥ 100%), the forced liquidation mechanism will be triggered, closing part or all of the positions to avoid greater losses.
In order to prevent the impact on market liquidity when large positions are blown up, CoinQ's contract products implement a position ladder maintenance margin rate system. That is, the larger the user's position, the higher the minimum maintenance margin rate, and the lower the maximum leverage multiple that the user can choose.
Calculation of maintenance margin
The amount of maintenance margin is related to the position value and the maintenance margin ratio, and the maintenance margin ratio is related to the risk limit.
The specific formula is as follows:
Maintenance margin for a single position = position value x maintenance margin ratio + liquidation fee
Full position mode: the number of positions and tiers of all directions of each contract are calculated together, and the required maintenance margin rate of all positions of all contracts is calculated together.
Margin rate = maintenance margin / total balance of contract assets
Single position mode: the number of positions and tiers of all directions of each contract are calculated together, and the required maintenance margin rate of each position of each direction of each contract is calculated separately.
Margin rate = maintenance margin / (position margin + unrealized profit and loss)
Example calculation:
Assuming that the user opens a BTC/USDT long position with a leverage of 100 times and a value of 1000 USDT, the maintenance margin ratio is 0.4%, the liquidation fee rate is 0.05%, and the current unrealized profit and loss is "0", the maintenance margin of the user's position is calculated as follows:
The maintenance margin of the position = (position value x maintenance margin ratio) + liquidation fee;
That is, (1000 x 0.4%) + 1000 x 0.05% = 4.5 USDT
Position margin is = (1000/100) + 1000 x 0.05% = 10.5 USDT
At this time, the margin rate of the position = 4.5 / (10.5 + 0) * 100% = 42.85%
Management of maintenance margin
To avoid forced liquidation, users should monitor their account margin regularly and take the following measures:
- Add margin: Deposit more funds in time when the account margin is insufficient
- Reduce position: Reduce maintenance margin requirements by reducing positions
- Use stop loss order: Set stop loss price and automatically sell to limit potential losses
- Reduce leverage: Reduce leverage multiples and increase fault tolerance
Maintenance margin is a crucial concept in cryptocurrency leverage trading, which helps ensure market stability and user financial security. Understanding and effectively managing maintenance margin can help users better control risks in volatile markets.
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