Calculate the Maximum Loss Percentage before a Margin Call for 10x Leverage.
For 10x leverage, the initial margin is 1/10 or 10% of the position value. Assuming the maintenance margin is slightly lower than the initial margin, for simplicity, let's use a 5% maintenance margin.
A loss of 5% of the position value would trigger a margin call, as this loss consumes half of the initial 10% margin, bringing the equity down to the 5% maintenance level. In general, a small percentage drop is all it takes.
Glossar
Initial Margin Percentage
Collateral ⎊ The initial margin percentage, within cryptocurrency derivatives and options trading, represents the portion of the total margin requirement that must be posted upfront as collateral.
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.
Maximum Loss Percentage
Exposure ⎊ The Maximum Loss Percentage, within cryptocurrency derivatives, options trading, and broader financial derivatives, quantifies the potential downside risk associated with a position.
Maximum Leverage
Amplification ⎊ Maximum leverage, within cryptocurrency and derivatives markets, represents the utilization of borrowed capital to increase the potential return of an investment, fundamentally altering risk-exposure profiles.
Initial Margin
Collateral ⎊ Initial margin represents the equity a trader must deposit with a broker or exchange as a good faith commitment to cover potential losses arising from derivative positions, notably within cryptocurrency markets.