Margins

Just like any other financial instrument, margin trading involves potential risks, so it’s essential to understand the basic principles of calculating the Initial and Maintenance Margin on the EVEDEX.

Initial Margin

The Initial Margin is the minimum amount of funds a trader must deposit into their account to open a margin position. Simply put, it’s the collateral reserved in the trading account and used to open positions. It is calculated as the ratio of the position size to the leverage:

$$Initial Margin = Position Value / Leverage$$

Example:

Due to the growing trend in BTC, trader Alex opens a long position from his point of interest (POI) and enters a 9,000 USDT trade using 30X leverage.

$$Initial Margin = 9,000 / 30 = 300 USDT$$

Opening the same position with the same amount but higher leverage (75X) would reduce the initial margin to 120 USDT.

$$Initial Margin = 9,000 / 75 = 120 USDT$$

Thus, changing the leverage only affects the initial margin amount, while the quantity of BTC in the position remains unchanged. However, higher leverage directly impacts the liquidation level: the higher the leverage, the closer the liquidation.

Maintenance Margin

The Maintenance Margin is the minimum level of collateral a trader must hold in their account to keep a position open. The system warns about the liquidation risk if the initial margin approaches the maintenance margin level. Once this level is reached, liquidation is triggered to prevent additional losses.

Using a specialized table containing rates corresponding to specific assets and position sizes, you can calculate the maintenance margin.

$$Maintenance Margin = Position Value × Maintenance Margin Rate$$

Example:

We have already determined that opening a position with 30X leverage requires Alex to provide 300 USDT as the initial margin. Assuming the maintenance margin rate for BTC is (E), the formula for calculating the maintenance margin would be:

$$300 USDT × (E)\% = Maintenance Margin$$

Important! The position will be automatically liquidated when the initial margin level equals the maintenance margin level.