Margin and Initial Margin
Margin refers to the principal required by the user when opening a position in futures trading, while the Initial Margin is the minimum amount that needs to be deposited to engage in a trade. Due to the high leverage feature of futures, users can engage in larger trades while holding the same principal, thereby amplifying both profits and losses.
In the isolated margin mode, users can increase or decrease the margin on a position, but the margin cannot fall below the sum of the initial margin and the exit fees. The initial margin ensures that users have sufficient funds to cover potential trading risks.
The Importance of Initial Margin
Initial margin plays a crucial role in futures trading for the following reasons:
- Risk Management: Initial margin ensures that users have sufficient funds to cover potential losses in futures trading, thereby reducing the risk for the exchange and other users.
- Credit Assurance: Initial margin acts as a form of credit assurance, ensuring that users can maintain their positions during market fluctuations.
- Leverage Trading: Initial margin allows users to control larger positions with less funds, thereby amplifying potential gains and losses.
Initial Margin Calculation
In cross margin mode, all available funds in the user’s account are considered as available margin.
For USDT-Margined (USDT-M) contracts: Initial Margin = |Number of Contracts| x Contract Multiplier x Mark Price / Leverage + |Number of Contracts| x Contract Multiplier x Mark Price x Exit Fee Rate. The initial margin will change as the price of the trading currency.
For Coin-Margined (Coin-M) contracts: Initial Margin = |Number of Contracts| / (Mark Price x Leverage) + (|Number of Contracts| / Mark Price) x Exit Fee Rate. The initial margin will change as the price of the trading currency.
In isolated margin mode, each position’s margin is calculated separately, with no impact on the profit or loss of other positions.
For USDT-M contracts: Initial Margin = |Number of Contracts| x Contract Multiplier x Average Entry Price / Leverage + |Number of Contracts| x Contract Multiplier x Average Entry Price x Exit Fee Rate. The initial margin is fixed and does not change.
For Coin-M contracts: Initial Margin = |Number of Contracts| / (Average Entry Price x Leverage) + (|Number of Contracts| / Average Entry Price) x Exit Fee Rate. The initial margin is fixed and does not change.
Example
A user opens a long position of 200 USDT with 50x leverage, and the fee rate is 0.075%.
The initial margin for the position is calculated as follows: (200 / 50) + 200 x 0.075% = 4.15 USDT
How to View and Manage Initial Margin?
- Account Information Page: Log in to your exchange account and go to the account information page to view your current positions and the required initial margin.
- Trading Page: During order placement, the system will automatically calculate and display the required initial margin.
- Contract Calculator: Some exchanges provide a contract calculator where users can input the position value and margin level to automatically calculate the required initial margin.
- Transfer Additional Funds: To avoid liquidation, users can deposit additional funds at any time to increase the margin balance.
Difference Between Initial Margin and Maintenance Margin
Initial Margin: The minimum amount of margin required when opening a position.
Maintenance Margin: The minimum amount of margin that must be maintained while holding a position.
FAQ
- How do I know how much initial margin I need to deposit?
The system will automatically calculate and display the required initial margin when placing an order. You can also use the contract calculator provided by Gate to calculate it. - What is the difference between initial margin and margin occupied by the position?
Initial margin is the minimum margin required when opening a position to ensure sufficient funds are available to open the position.
Margin occupied by the position is the margin level that must be maintained while holding a position, which may vary with market fluctuations.
Difference: Initial margin is the minimum requirement at the time of opening a position, and the margin occupied by the position is the ongoing margin requirement while holding a position.
Gate reserves the final right to interpret the product.
For further assistance, please visit the Gate official support page or contact our customer support team.
