Margin trading means you are borrowing to trade, and only put down a part of the normally required balance as margin. In turn, you will need to maintain your account balance above a certain level in order to avoid a margin call and having positions closed early.
- Margin (“Used Margin”): the actual value of the order, divided by leverage rate.
- Balance: total fiat balance of your selected trading currency.
- Equity: the sum of balance (“Balance”) and unrealized profits and losses (“Unrealized P&L”)
- Available Margin: Equity – Used Margin, or Balance + P&L – Used Margin
To avoid margin calls, available margin always has to be more than 10% of used margin. Once available margin is getting between 20% and 10%, system will send a warning. Once it reaches 10% of used margin or lower, the margin call will happen, and your open positions will be closed one by one until available margin is brought back above 10% of used margin.
Crypto currency trading market can be very volatile at times. It is not uncommon that a trader takes a position the first day with a safe margin and finds himself in a margin call the next. The higher the leverage rate, the higher the risk.
There are many ways to avoid margin calls when available margin is getting low. You can either deposit more fiat, or cancel some positions to lower used margin.