Margin and Leverage

   

1. What Is Margin?

   

In futures trading, it is generally not necessary to provide the full value of a position upfront. Instead, only a portion of the funds is required to open a position. These funds are known as “margin.”

If you plan to trade a BTC perpetual futures position worth 1,000 USDT, you typically do not need to provide the full 1,000 USDT when using leverage. Instead, only a portion of the funds is required as margin.

  

  

2. What Is Leverage?

   

Leverage is a common feature in futures trading that operates based on the margin system.

With leverage, traders can control a larger position using a smaller amount of margin, potentially amplifying returns.

   

If BTC is trading at 10,000 USDT and a BTC perpetual futures position worth 1,000 USDT is opened using 10x leverage, the required margin is calculated as follows:

Margin = Position Value ÷ Leverage Multiplier = 1000 ÷ 10 = 100 USDT

This means only 100 USDT in margin is needed to open a futures position worth 1,000 USDT.

  

Generally speaking, higher leverage requires less margin to open a position, but it also increases position risk.

  

  

3. Common Margin Concepts

    

(1) Initial Margin

Initial margin is the minimum amount of margin required to open a new position.

Different leverage levels correspond to different margin requirements. In general, the higher the leverage, the lower the margin required to open a position.

The initial margin ratio is typically approximately equal to: 1 ÷ Leverage Multiplier

   

• With 10x leverage, approximately 10% of the position value is required as initial margin

• With 20x leverage, approximately 5% of the position value is required as initial margin

   

Simply put, initial margin determines the minimum amount of funds required before opening a position.

  

(2) Position Opening Cost

Position opening cost refers to the funds required to open a position, which typically include:

• Initial margin

• Estimated trading fees

After a position is opened, these funds will affect the account’s available balance.

  

(3) Position Margin

Position margin refers to the amount of margin currently supporting an open position.

Unrealized PnL refers to the floating profit or loss generated by a position that has not yet been closed.

During the holding period, position margin changes in real time based on unrealized PnL and may also increase if additional margin is added.

Higher position margin generally improves a position’s ability to withstand market volatility and reduces liquidation risk.

  

(4) Maintenance Margin

Maintenance margin is the minimum amount of margin required to maintain an open position.

If the position margin falls below the platform’s required maintenance margin level, the system may trigger partial or full liquidation to prevent further losses.

• The higher the position risk, the higher the required maintenance margin

• More margin generally reduces the likelihood of liquidation

  

Simply put, maintenance margin is the minimum safety buffer required to keep a position active.

  

(5) Margin Ratio

Margin ratio is an important indicator of a position’s current risk level.

• The higher the margin ratio, the lower the position risk

• The lower the margin ratio, the higher the position risk

If the margin ratio falls below the platform’s required level, liquidation risk may increase significantly.

  

  

4. What Is Manual Margin Addition?

  

Adding margin manually can help reduce liquidation risk and improve position stability.

After additional margin is added:

• The likelihood of liquidation may decrease

• The position can generally withstand a wider range of price fluctuations

  

  

Risk Warning

  

Futures trading involves high risk. While leverage can amplify potential profits, it can also amplify potential losses.

Before participating in futures trading, we recommend fully understanding the margin system, leverage rules, and liquidation mechanisms, and using leverage responsibly within your risk tolerance.