The Relationship Between Leverage and Margin
Margin refers to the principal required for you to participate in futures trading when opening a position. Since the contract has the attribute of high leverage, you can trade with a larger finance scale while holding the same amount of principal.
Leverage has the characteristic of magnifying profits and losses.
When holding the same position, the higher the leverage, the lower the amount of margin is required, and the higher the risk is.
Relatively, the lower the leverage, the greater the amount of margin is required, and the lower the risk is.
There are two margin modes on Gate: Isolated Margin Mode and Cross Margin Mode.
Isolated Margin Mode
In the isolated margin mode, there is a fixed value of the position margin. It starts with the initial margin which can be changed by adjusting the leverage, risk limit, deposit and withdrawal margin. When the margin balance is equal to or lower than the maintenance margin, a liquidation will be triggered. At this point, the position margin could be the largest loss for you.
Calculation formula of initial margin in isolated margin mode
Initial Isolated Margin = (Position Value / Leverage) + Fee to Close
For Example
User A is currently holding a position worth 100 USDT with 100X leverage in isolated margin mode, then the margin is:
100/100+100 x 0.075%=1.075USDT
If you want to know how to adjust the margin mode, please refer to How to Adjust the Leverage, Swtich the Margin Mode or Position Mode.
Cross Margin Mode
In the cross margin mode, all balances in your account are used as margin. You can set up multiple contract positions as crossing margin mode, in which all positions can share the account balance as margin. However, the unrealized PNL cannot be used as a margin for other positions. In this margin mode, when the net asset value is insufficient to meet the maintenance margin requirements, the liquidation will be triggered. If the position is liquidated, you will lose all assets in the corresponding currency.
Calculation formula of initial margin in cross margin mode
Initial Cross Margin = Position Value x Initial Margin Ratio + Fee to Close
When there’s an unrealized PNL and in a loss state, the abs should be added to the margin under the cross margin mode.
For Example
User B is currently holding a position worth 100 USDT in cross margin mode, the initial margin ratio is 1%, the balance is 200 USDT, and the current unrealized profit and loss is +10 USDT. Then its margin is:
100 x 1% + 100 x 0.075% = 1.075 USDT
That is, the margin shown in the position is 1.075 USDT, and the actual position margin is 200 USDT.
Note
- In one-way position mode, isolated margin and cross margin are interchangeable anytime while holding positions. In hedge position mode, they are not interchangeable.
If you want to know how to switch the position mode, please refer to How to Adjust the Leverage, Swtich the Margin Mode or Position Mode. - The leverage will not affect the unrealized PNL.
When the leverage of the position is adjusted, the amount of initial margin will change accordingly, but the number of positions will remain unchanged.
As mentioned above, the advantages of high leverage is that you can open a larger number of contracts with the same margin amount. Therefore, the unrealized PNL will increase due to the increase in the number of contract.
Gate reserves the final right to interpret the product.
