What is Maintenance Margin
Maintenance margin refers to the minimum amount required to keep the position from being liquidated. In futures trading, if the account balance falls below this level, the position may be subject to liquidation.
Why Maintenance Margin Matters
Maintenance margin is intended to protect exchanges and traders from possible losses. When the market moves against the position holder and the account margin is insufficient to maintain the position (i.e., when the current maintenance margin ratio (MMR) falls to 100% or below), liquidation will be triggered to close part or all of the position to avoid further losses.
How Maintenance Margin is Calculated
The required maintenance margin in futures trading is calculated using a tiered algorithm. Different risk limit tiers have corresponding MMR. The higher the risk limit, the higher the MMR. Factors such as position value, tiered MMR, and fees affect the final maintenance margin.
| Pair | Tier | Risk Limit | Tiered MMR | IMR | Max Leverage |
|---|---|---|---|---|---|
| BTC/USDT | 1 | 20,000 | 0.40% | 0.80% | 125x |
| BTC/USDT | 2 | 50,000 | 0.45% | 0.90% | 111x |
| BTC/USDT | 3 | 100,000 | 0.50% | 1% | 100x |
| BTC/USDT | 4 | 200,000 | 0.70% | 1.33% | 75x |
| BTC/USDT | 5 | 1,000,000 | 1.00% | 2.00% | 50x |
| BTC/USDT | 6 | 2,000,000 | 2.00% | 4.00% | 25x |
| BTC/USDT | 7 | 3,000,000 | 5.00% | 10.00% | 10x |
| BTC/USDT | 8 | 5,000,000 | 50.00% | 95.00% | 1.05x |
Example Calculation: Assume a user opens a position worth 150,000 USDT. The required maintenance margin would be: 20,000 × 0.40% + (50,000 - 20,000) × 0.45% + (100,000 - 50,000) × 0.50% + (150,000 - 100,000) × 0.70% = 815 USDT In one-way mode: Maintenance Margin (For a single position) = Required Maintenance Margin + Estimated Liquidation Fee In hedge mode: Maintenance Margin (For hedging positions) = max(Maintenance Margin for Long, Maintenance Margin for Short) + Estimated Liquidation Fee for Hedging Positions The maintenance margin for long and short positions is calculated using the same tiered structure as in one-way mode. In cross margin mode: Maintenance Margin = Sum of Maintenance Margins for All Positions
Example: A user opens a BTC/USDT long position worth 1,800,000 USDT using 100x leverage. The liquidation fee rate is 0.075%. Assume that the risk limit table for BTCUSDT is as follows:
| Tier | Risk Limit | IMR | Tiered MMR | Max Leverage |
|---|---|---|---|---|
| 1 | 1,000,000 | 0.80% | 0.40% | 125x |
| 2 | 1,500,000 | 0.90% | 0.45% | 111x |
| 3 | 2,000,000 | 1% | 0.50% | 100x |
| 4 | 3,000,000 | 1.33% | 0.70% | 75x |
Required Maintenance Margin: 1,000,000 × 0.40% + (1,500,000 - 1,000,000) × 0.45% + (1,800,000 - 1,500,000) × 0.50% = 7,750 USDT Maintenance Margin (For a single position) = 7,750 + 1,800,000 × 0.075% = 9,100 USDT Initial Margin = 1,800,000 / 100 + 1,800,000 × 0.075% = 19,350 USDT If there are no other funds in the user's account, the margin ratio for the position = 19,350 / 9,100 = 212.64%
Difference Between Initial Margin and Maintenance Margin
- Initial Margin: The minimum amount required to open a position. It is usually higher than the maintenance margin.
- Maintenance Margin: The minimum amount that must be maintained while holding a position.
Liquidation Mechanism
When the account margin is lower than the maintenance margin (i.e. the MMR falls to 100% or below), the liquidation will be triggered to reduce potential losses.
How to Manage Maintenance Margin
To avoid liquidation, you should regularly monitor the account margin and take the following actions:
- Add Margin: Deposit additional funds if the margin is insufficient.
- Reduce Position: Decrease position size to lower the margin requirement.
- Use SL Orders: Set stop-loss (SL) conditions to limit potential losses.
- Lower Leverage: Reduce leverage to increase the safety buffer.
Other Related Information
- Risk Limit: Risk limit defines different tiers of risk set by the exchange. Each tier corresponds to a different MMR. You can choose an appropriate risk limit based on position size and risk tolerance.
- MMR: You can view the MMR on the Contract Details page. Be sure to check it before opening a position.
FAQ
Q: When is liquidation triggered? A: When the account margin falls below the required maintenance margin and no additional funds are added in time, liquidation is triggered.
Q: How can I avoid liquidation? A: Add margin in time to maintain sufficient balance. Reduce position size to decrease margin requirements. Lower leverage to reduce risk exposure. Cancel open orders to free up margin. Use stop-loss (SL) orders to limit losses.
Maintenance margin is a critical concept in crypto trading. It helps ensure market stability and safeguards your funds. Understanding and effectively managing maintenance margin can help you better control risks in a volatile market. We hope the above information helps you better understand and manage your maintenance margin. Always stay mindful of risks and manage your funds wisely when trading.
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