Definition of Initial Margin and Maintenance Margin

• Initial Margin: In leveraged trading, the minimum collateral required to open a position. It is inversely proportional to the leverage used by the trader; the higher the leverage, the lower the required initial margin. The calculation formula is: Initial Margin = Opening Value × Initial Margin Rate, where Initial Margin Rate = 1/Leverage × 100%.

• Maintenance Margin: The minimum Margin amount required for traders to continue holding a position. When the Margin level used for the position falls below the maintenance Margin level, the position will be liquidated. The calculation formula for maintenance Margin is: Maintenance Margin = Contract Value × Maintenance Margin Ratio.

The relationship between the margin ratio and the risk of forced liquidation

• Cross margin mode: In the cross margin mode, when the position Margin falls below the maintenance Margin, the position will be liquidated. The liquidation risk can be calculated by the following formula: Liquidation risk (cross margin) = Maintenance Margin / Position Margin × 100%. When the liquidation risk reaches 70%, the exchange will issue a liquidation warning notification, and when it exceeds 100%, the liquidation process will be triggered.

• Cross Mode: In the cross mode, when the position Margin is less than the maintenance Margin, Margin will be automatically allocated from the available balance to this position. When the available balance is insufficient, the position will be liquidated. The liquidation risk calculation formula is: Liquidation Risk (Cross) = Maintenance Margin / (Available Balance + Position Margin) × 100%.

• Risk Level: In some trading scenarios, the Margin risk is measured by the risk level. Risk level = Required Margin / Account Equity. When the risk level exceeds a certain threshold (e.g., 100%), there may be a risk of forced liquidation.
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