The Isolated Margin Mode allows traders to manage risk more precisely by isolating margins for individual positions. This ensures that adverse events affecting one position do not impact others. However, this increased control comes with reduced asset utilization, as the margin allocated to one position cannot be shared with others.
Initial Margin (IM) Vs Maintenance Margin (MM)
Initial Margin (IM) is the amount of margin balance required to open a position. This margin serves as a buffer to absorb potential losses, ensuring that traders have enough capital to maintain their positions. It is crucial because insufficient IM can lead to the position being liquidated if the market moves against the trader.
Maintenance Margin (MM) is the minimum amount of margin required to keep a position open. As the market moves against a position, unrealized losses reduce the position margin. If the remaining position margin falls to or below the maintenance margin requirement, the position will be liquidated.
MM serves as the minimum safety buffer required to maintain an open position. The closer a position's margin is to the maintenance margin requirement, the higher the liquidation risk.
In simple terms, Initial Margin is the amount required to open a position, while Maintenance Margin is the minimum amount required to maintain that position open.
Initial Margin and Maintenance Margin Calculations
Spot Trading
Spot Trading involves buying and selling actual assets with no borrowing allowed, therefore, the initial margin or maintenance margin is not relevant. Spot margin trading is not supported in the Isolated Margin mode.
Perpetual & Futures Trading
The calculation of IM and MM in Isolated Margin Mode is the same for both the One-Way mode and Hedge mode, as the margin for each position is isolated from others.
Formula
Initial Margin = Position Value ÷ Leverage
Maintenance Margin = (Position Value x MMR) - Maintenance Margin Deduction
Whereas,
USDT and USDC Contracts’ Position Value = Position Size x Mark Price
Inverse Contracts’ Position Value = Position Size ÷ Mark Price
Please note that the initial margin and maintenance margin shown in the position tab includes the taker fee, which may be incurred in closing the position.
Estimated Fee to Close Position
Long direction = Position Average Entry Price x Position Size × (1 − 1 / Leverage) × Taker Fee Rate
Short direction = Position Average Entry Price x Position Size × (1 + 1 / Leverage) × Taker Fee Rate
Important note:
Since the initial Margin is calculated using the Mark Price, the Mark Price fluctuates continuously based on market conditions, the position value and corresponding Initial Margin requirement will also change in real time.
When the mark price rises, your position value increases, which in turn raises the margin requirement. However, if you are in a long position, this will not increase your overall account risk since your unrealized profit offsets the rise in the required margin.
For more details calculation with examples, please refer to the articles below:
USDT Perpetual and Expiry Contracts
- Initial Margin (USDT Perpetual and Expiry Contracts)
- Maintenance Margin (USDT Perpetual and Expiry Contracts)
USDC Perpetual Contracts
Inverse Perpetual and Expiry Contracts