How Is the ‘Margin Requirement’ Calculated for a Leveraged Position?
The margin requirement is the minimum amount of capital a trader must deposit and maintain in their account to open and hold a leveraged position. It is calculated as a percentage of the total value of the position.
For example, if a position is $10,000 and the initial margin requirement is 10% (10x leverage), the trader must deposit $1,000. This amount acts as collateral and is the maximum loss the trader can sustain before the exchange initiates liquidation.
Glossar
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.
Margin Requirement
Collateralization Standard ⎊ Margin Requirement is the minimum amount of collateral, expressed as a percentage of the notional value, that a trader must deposit to open or maintain a leveraged derivatives position, ensuring the exchange has a buffer against adverse price movements.