What is Margin?

In the virtual contract market, traders only need to pay a small amount of money according to the price of the contract, according to a certain rate as a financial guarantee for the performance of the contract, you can participate in the purchase and sale of the contract, this kind of money is the virtual contract margin.

The relationship between margin and leverage

The most common definition of leverage involves maximizing the use of something to its greatest advantage. In the financial world, the definition is similar. Using leverage optimizes profit potential and allows you to operate a large amount of money with a small amount of capital, thus increasing the value of your investment in the market.



The principle of leverage in contract trading is centered on the margin system of contract trading, i.e., you do not need to deposit 100% of your funds when trading contracts, but only a small amount of funds based on the value of the contract, at a certain rate, as collateral for the fulfillment of the contract, in order to participate in the purchase and sale of the contract, which is called the margin. Leverage makes the utilization of funds greatly improved, high yield is also accompanied by high risk. Margin is the amount of money you need to open a position, and leverage is a multiple of that margin.



The use of leverage in perpetual contracts allows for higher returns, but also increases risk. Before using leverage, you need to assess your risk tolerance and analyze the market risk. If you think the market outlook is favorable, you may consider using leverage to invest for higher returns. However, if the market outlook is uncertain or if you anticipate that the market may fluctuate significantly, then investing with leverage is a high-risk practice.

Relationship between Position, Leverage, Initial Margin, Maintenance Margin Ratio and Margin Ratio

Leverage: The amount of leverage selected by the user to open a position.

Initial Margin: The minimum amount of margin required to open a position, while the Initial Margin Ratio (value of open position/margin on position) also represents your leverage multiple.

Opening Costs: The total amount of frozen assets required to open a position, which includes the starting margin and commission for opening the position.

Maintenance Margin: The minimum margin requirement to maintain a position, below which a margin event or partial margin event will be triggered.

Maintenance Margin Rate: The minimum margin rate required to maintain the current position. Maintenance margin rate is different, the corresponding burst price is also different. If the index price reaches the user's burst price, the process of reducing or closing will be triggered.

Margin Ratio: The ratio of the user's current account equity to the value of the position, which is used to compare with the Maintenance Margin Ratio to determine whether or not to trigger a margin call.

What is Automatic Margin Call?

Under the position-by-position mode (full position mode does not have this function), after turning on the automatic margin call function, when your position in this contract is close to bursting, the available balance will be automatically added to the position margin to increase the position margin rate to the initial margin rate at the time of the opening of the position, and if the available balance is insufficient, it will be added to all the current available balance in one go. This reduces the probability of your position blowing up.