Are Margin Calls Common in Crypto Futures Trading?
Traditional margin calls (where the exchange notifies the trader to deposit funds) are less common in crypto futures trading than in traditional finance. Crypto exchanges often use an automated, immediate forced liquidation system when the maintenance margin is breached.
However, some exchanges may send an alert or 'soft' margin call as the margin ratio approaches the liquidation threshold.
Glossar
Margin Calls
Trigger ⎊ Margin calls represent a demand from a brokerage or exchange for an investor to deposit additional funds or collateral to bring the account back to the required maintenance margin level, particularly relevant in leveraged cryptocurrency trading and derivatives markets.
Automated Liquidation
Liquidation ⎊ Automated liquidation protocols, increasingly prevalent in cryptocurrency derivatives and options trading, represent a pre-programmed response to adverse price movements designed to mitigate counterparty risk and safeguard collateral.
Forced Liquidation
Trigger ⎊ Forced liquidation occurs when a trader's margin account falls below a predetermined maintenance margin level, compelling the broker or protocol to automatically close positions.
Maintenance Margin
Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.
Crypto Futures Trading
Derivatives ⎊ Crypto futures trading, within the broader context of cryptocurrency, options trading, and financial derivatives, represents a specialized segment enabling the exchange of contractual obligations predicated on the future price of digital assets.
Crypto Exchanges
Exchange ⎊ Crypto exchanges represent specialized platforms facilitating the trading of cryptocurrencies, derivatives, and related assets.