How Can a Trader Respond Effectively to a Margin Call?
The most effective response to a margin call is to immediately deposit enough additional collateral to bring the margin ratio well above the maintenance margin level. Alternatively, the trader can reduce the position size by partially closing the trade, which lowers the required maintenance margin.
A quick, decisive action is necessary to prevent the inevitable automated liquidation.
Glossar
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.
Margin Ratio
Leverage ⎊ Margin ratio, within cryptocurrency and derivatives markets, quantifies the extent to which an investor’s exposure is amplified by borrowed capital, directly impacting potential profitability and systemic risk.