Margin & Leverage
Hotcoin1.What is Margin?
Margin is a good-faith deposit, or an amount of capital one needs to post or deposit to hold position.
2.The relation between Margin required and Leverage.
Leverage allows traders to enter a position which is worth much more by committing only a little amount of money. The gain or loss is therefore, greatly magnified.
Example:
If the current BTC price is USD 10,000, and a user wants to open a 10x long position of perpetual swap,and users are using 10x long Perpetual Swap Contract,
the Number of Swaps opened = Long Contract Amount= 1000
Initial Margin = Contract Multiplier * Number of Swaps *Latest Transaction Price ／（Leverage Multiple）=0.0001*1000*10000 /（10）=100 USDT
Hints: High leverage is owning high yield and high risks at the same time. Please be fully aware of the risks before trading.
3.Positions, Leverage, Initial Margin, Maintenance Margin, and Margin Ratio
For different swaps, Hotcoin has setted different position tiers and maximum leverage multiples according to their risk levels.
For more details please refer to Futures-Position Tier page, logged in users please click on the link below:
https://hotcoinex.cc/contract/position
Leverage: the leverage level chosen by the user when opening a position
Initial Margin Ratio: 1 / Leverage
Position Margin：= Contract Multiplier * Position Holdings *Average Transaction Price／Leverage
Maintenance Margin Ratio: the lowest required margin ratio for maintaining the current open positions. The corresponding price varies with the maintenance margin ratio and liquidation price. If the index price reaches the liquidation price of users, Deleveraging or liquidation procedures will be trigger.
Maintenance Margin Ratio Is used to counting liquidation price:
Long Position Liquidation Price = (Position Holdings* Contract Multiplier *Average Open Price – Initial Margin) / ( (1 - Maintenance Margin) * Contract Multiplier * Position Holdings)
Short Position Liquidation Price= (Position Holdings * Contract Multiplier * Average Open Price + Initial Margin ) / ( (1 + Maintenance Margin) * Contract Multiplier * Position Holdings)
Margin Ratio:
Margin Ratio =（Position Holdings +Unrealized P/L）／ Position Value =（Position Margin+ Unrealized P/L）／（Position Holdings * Contract Multiplier * Average Open Price）
For example:
Let the price of 1 BTC be USD 10,000, a user who selected 10x Leverage opens a long position contract of 1000, the risk limits stays at tier 1, Maintenance Margin Ratio will be 0.5%.
The Initial Margin Ratio for this position is 1 / 10 = 10%
Margin = Contract Multiplier * Number of Swaps *The latest transaction price／（Leverage）=0.0001*1000*10000/10=100 USDT
Liquidation Price： (Position Holdings * Contract Multiplier * Average Open Price – Initial Margin) / ( (1 - Maintenance Margin Ratio) * Contract Multiplier * Position Holdings)= (1000*0.0001*10000-100)/((1-0.5%)*0.0001*1000)= 9045.2261
When the latest transaction price of BTC falls to $9045, the index price is $9055.5.
Unrealized P/L= Contract Multiplier * latest transaction price * Position Holdings - Contract Multiplier * Average Open Price * Position Holdings=0.0001*9045*1000-0.0001*10000*1000=-95.5
While，Margin Ratio=（Position Margin+ Unrealized P/L）／Open Position Value=（100-95.5 ）／（10000*0.0001*1000）=4.5／1000=0.45%<0.5%
And Because the index price ($9055.5) didn’t reach to the short position price ($9045.2261), it won't trigger liquidation.
4.Can I add margin manually?
Yes. However you may only do so in Fixed Margin Mode. Simply enter the amount of margin you would like to add for your positions to reduce liquidation risk.
After the change of margin, the corresponding leverage and liquidation price will also be changed.