What is graded margin?
Graded margin is a risk management mechanism used to limit the risk of traders holding positions. In a trading environment with large price fluctuations, traders who use high leverage alone to hold large positions will likely bring huge losses in position wear. If the insurance fund has been exhausted, the ADL system may be triggered, which will bring additional risks to other traders.
The multi-level margin adopts the dynamic risk limit mode to determine the initial margin rate and maintenance margin rate of each position, which will help avoid the occurrence of a large-amount liquidation event. Through it, traders with large positions need to pay a higher initial margin, while the maximum leverage that can be used is also lower.
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Dynamic risk limit
Each contract has a basic risk limit and incremental amount. These parameters, combined with the basic maintenance and initial margin requirements, are used to calculate the complete margin requirements for each position.
As positions increase, maintenance margin and initial margin requirements will also increase. The margin rate will increase or decrease as the risk limit changes.
Risk limit level of the current contract:
- Open position risk level = （position value + unsettled open position commission value – basic risk limit）/incremental amount+1
- Holding position risk level= （position value – basic risk limit）/incremental amount +1
Note: The risk limit level is rounded up
The margin requirements for each contract product are as follows:
Current risk level initial margin rate：IMR= risk limit level *0.01
Current risk level maintenance margin rate：MMR=risk limit level *0.005
Note: When opening a position, the corresponding margin is frozen according to the risk level of the position; when there is a holding position, the corresponding margin is required according to the risk level of the position. If the minimum maintenance margin of the current level is not met, the position will be forcibly reduced until the requirement is met.
Among them, the basic data are as follows:
|Contract||Basic Risk Limit||Risk Limit Incremental Amount|
|BTCUSD Perpetual Contract||1000,000 USD||500,000 USD|
|ETHUSD Perpetual Contract||1000,000 USD||500,000 USD|
To be noted：
- The maintenance margin rate is up to 50%, and the initial margin rate is up to 100%;
- The minimum risk level is 1.
1. If the current position margin rate does not meet the minimum maintenance margin required by the current risk level, the order will be cancelled and the position will be reduced to ensure that the current margin rate is greater than the current risk level maintenance margin rate.
2. Deleveraging steps
1）Fixed margin, cancel the liquidation order —> "One risk limit increment" is reduced from the position
2）Cross margin, cancel the open order —> Cancel the liquidation order, mutual dealing with long and short "half the risk limit increment (0.5 + 0.5 = 1)" —> reduce the "one risk limit increment"