Margin Rules

Initial and Maintenance Margins

Initial margin refers to the minimum collateral required to open a position, while maintenance margin is the minimum amount needed to maintain that position. Due to differing trading strategies, SAFEX uses two margin mechanisms: cross margin and isolated margin.

Cross Margin

Collateral is shared among positions. If needed, more margin is drawn from the account balance to prevent liquidation. For example, if Xiaoming opens a 100 BTC/USDT long position with an initial margin of 517.04 USDT in cross margin mode, and market prices drop such that the required margin exceeds the initial margin, the excess amount (e.g., 82.96 USDT to make up to 600 USDT total) will be drawn from Xiaoming's account balance to prevent liquidation.

Isolated Margin

Margin allocated to a specific position is capped at a certain amount. If the margin for a position falls below the maintenance level, that position will be forcibly closed. This mode allows you to manually increase or decrease the margin for that position. For example, if Xiaoming opens a 100 BTC/USDT long position with an initial margin of 517.04 USDT in isolated margin mode, and market prices drop such that the required margin exceeds the initial margin, the platform will forcibly close Xiaoming's position to reduce his losses.

Different Margin Accounts

Different types of collateral belong to different margin accounts and do not affect each other. For instance, BTC margin accounts and USDT margin accounts are independent.

Cross Margin

Also known as "portfolio margin," this uses all available balances to avoid liquidation. Profits from other positions can help increase the margin on losing positions. This method is useful for hedgers and arbitrageurs who do not want to expose one side of their positions to liquidation risks. Note that by default, all positions are set to use cross margin.

Isolated Margin

In this mode, your maximum loss is limited to the initial margin used. Any available balance will not be used to increase the margin on a position being liquidated. Isolated margin is useful for speculative positions. By isolating the margin used for a position, you can limit losses to the initial margin amount, which can help in failing short-term speculative trading strategies. In volatile markets, a highly leveraged position can quickly deplete its margin. However, note that while SAFEX aims to minimize the occurrence of liquidations, highly leveraged positions are more likely to be liquidated in volatile markets. For example, a 50x leveraged position would be liquidated if the market moves 2% against it. When using isolated margin, you can adjust your leverage in real-time via the leverage slider.

Setting and Adjusting Isolated Margin

By default, cross margin is enabled. Users can switch to isolated margin using the leverage slider on the order control widget on the left side of the trading panel. Moving the slider to the right increases leverage, using less margin for the position. Note that the chosen leverage for each contract is saved, even after positions are fully closed. When using isolated margin for a position, the amount of margin is adjustable. This allows you to choose a desired leverage and liquidation price. The liquidation price for your position is displayed in the open positions tab and updates as you adjust the leverage.

Isolated Margin and Mark Price

During extreme volatility or significant bull or bear markets, the market may trade temporarily far from a reasonable mark price. If your buying or selling price is significantly distant from the mark price, you will see an unrealized loss immediately upon opening the position. However, note that this does not necessarily mean you have lost money. It's wise to be cautious of your liquidation price under these market conditions and avoid using the highest leverage with isolated margin; otherwise, your position could be quickly liquidated due to potential immediate unrealized losses upon opening.

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Last updated 9 months ago

Cross Margin

Collateral is shared among positions. If needed, more margin is drawn from the account balance to prevent liquidation. For example, if Xiaoming opens a 100 BTC/USDT long position with an initial margin of 517.04 USDT in cross margin mode, and market prices drop such that the required margin exceeds the initial margin, the excess amount (e.g., 82.96 USDT to make up to 600 USDT total) will be drawn from Xiaoming's account balance to prevent liquidation.

Isolated Margin

Margin allocated to a specific position is capped at a certain amount. If the margin for a position falls below the maintenance level, that position will be forcibly closed. This mode allows you to manually increase or decrease the margin for that position. For example, if Xiaoming opens a 100 BTC/USDT long position with an initial margin of 517.04 USDT in isolated margin mode, and market prices drop such that the required margin exceeds the initial margin, the platform will forcibly close Xiaoming's position to reduce his losses.

Different Margin Accounts

Different types of collateral belong to different margin accounts and do not affect each other. For instance, BTC margin accounts and USDT margin accounts are independent.

Cross Margin

Also known as "portfolio margin," this uses all available balances to avoid liquidation. Profits from other positions can help increase the margin on losing positions. This method is useful for hedgers and arbitrageurs who do not want to expose one side of their positions to liquidation risks. Note that by default, all positions are set to use cross margin.

Isolated Margin

In this mode, your maximum loss is limited to the initial margin used. Any available balance will not be used to increase the margin on a position being liquidated. Isolated margin is useful for speculative positions. By isolating the margin used for a position, you can limit losses to the initial margin amount, which can help in failing short-term speculative trading strategies. In volatile markets, a highly leveraged position can quickly deplete its margin. However, note that while SAFEX aims to minimize the occurrence of liquidations, highly leveraged positions are more likely to be liquidated in volatile markets. For example, a 50x leveraged position would be liquidated if the market moves 2% against it. When using isolated margin, you can adjust your leverage in real-time via the leverage slider.

Setting and Adjusting Isolated Margin

By default, cross margin is enabled. Users can switch to isolated margin using the leverage slider on the order control widget on the left side of the trading panel. Moving the slider to the right increases leverage, using less margin for the position. Note that the chosen leverage for each contract is saved, even after positions are fully closed. When using isolated margin for a position, the amount of margin is adjustable. This allows you to choose a desired leverage and liquidation price. The liquidation price for your position is displayed in the open positions tab and updates as you adjust the leverage.

Isolated Margin and Mark Price

During extreme volatility or significant bull or bear markets, the market may trade temporarily far from a reasonable mark price. If your buying or selling price is significantly distant from the mark price, you will see an unrealized loss immediately upon opening the position. However, note that this does not necessarily mean you have lost money. It's wise to be cautious of your liquidation price under these market conditions and avoid using the highest leverage with isolated margin; otherwise, your position could be quickly liquidated due to potential immediate unrealized losses upon opening.