Margin refers to the amount needed to enter into a leveraged position.
Successful trading with leverage requires an understanding of the following concepts:
Starting Margin: This minimum margin required to open a position. Your starting 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.
Risk Limits: When a large position is liquidated, it may cause violent price fluctuations, and result in auto-deleveraging of traders who have taken up an opposing position because the size of the liquidated position exceeds the existing liquidity of the market.
To reduce market impact and the traders affected by liquidation events, MEXC has implemented a risk limiting mechanism, which requires large positions to provide increased initial and maintenance margins. This way, when a large position is liquidated, the probability of widespread auto-deleveraging is reduced, which prevents a chain of market liquidations.
Dynamic risk limit
Each contract has a base risk limit and a step. These parameters, combined with the base maintenance and initial margin requirements, are used to calculate the full margin requirement for each position.
As the position size increases, the maintenance margin and initial margin requirements will also increase. As the risk limit changes, so too will the margin requirements. .
The risk limit level of the current contract can be calculated as follows:
Risk limit level [Rounded up] = 1 + (position value + unfilled order value - base risk limit) / step
The margin requirements for each contract are as follows:
Starting margin: IMR = risk limit level *0.01=[(position value + unfilled order value - base risk limit) / incremental amount +1] *0.01
Maintenance margin: MMR = risk limit level *0.005=[(position value + unfilled order value - base risk limit) / incremental amount +1] *0.005
The risk limits for each contract type are as follows:
|Contract||basic risk limit||Increase in risk limit|
|BTCUSDT Perpetual Contract||200,000 USDT||100,000 USDT|
|ETHUSDT Perpetual Contract||100,000 USDT||50,000 USDT|
Simply put, for every 100,000 USDT increase in the size of a BTC/USDT Perpetual Contract position, the risk limit level increases by 1.