What is Margin in Futures

All futures in the MEXC Futures require a certain amount of margin, and more position margin also gives the futures more leverage.

Basic concepts

Initial Margin: This minimum margin is required to open a position. Your initial margin is dependent on margin rate requirements.

Maintenance Margin: The minimum margin requirement for maintaining a position below which additional funds will have to be deposited or forced liquidation may occur.

Opening Cost: The total amount of funds required to open a position, including the initial margin for opening a position and transaction fees.

Actual leverage: The current position includes the leverage ratio of unrealized gains and losses.

Margin calculation

In futures trading, the order cost (position margin) is the margin required to open a position.

The general formula is as follows:

USDT-margined Futures: Position margin = Position avg. price * Position size / leverage multiplier

Coin-margined Futures: Position margin = Position Size / Leverage multiplier

What follows are a series of examples that will provide more clarity on margin required when opening a position in USDT/Coin-margined Futures.

USDT-margined Futures

If a trader wants to purchase 0.1 BTC position of BTCUSDT futures at the price of $50,000 with a leverage multiplier of 25,

then the margin required = 50000×0.1/25= 200USDT

Coin-margined Futures

If a trader wants to purchase 0.1 BTC position of BTCUSD Futures at the price of $50,000 with a leverage multiplier of 25,

then the margin required = 0.1/25 = 0.004BTC;

Add-on Margin

In the isolated margin mode, you can add position margin through the position information bar, and you can also adjust the margin reduction to improve capital efficiency.

In the cross margin mode, you need to add position margin by transferring funds from your spot account to the futures account.

Risk Limit

MEXC Futures will give a risk limit on each account. In this way, the liquidation of larger positions will happen less. With the increase of position, the required initial margin and maintenance margin will be higher. The margin rate will be increased or decreased with the change of risk limit.

Here, you can check and change your risk limit.

As BTCUSDT Futures an example, when holding a position less than 1 BTC, the maintenance margin is 0.40%.

Closing thoughts

In futures trading, you need to pay attention to your margin situation at any time, and better use of margin can increase profits and reduce risk.

Disclaimer: Trading crypto involves significant risk and can result in the loss of your invested capital. The materials are not related to the provision of advice regarding investment, tax, legal, financial, accounting, consulting, or any other related services and are not recommendations to buy, sell, or hold any asset. MEXC Learn solely provides information, but not financial advice. You should ensure that you fully understand the risk involved before investing.

Share your love to MEXC Global
Default image
MEXC
Articles: 353
Read Learn Watch