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What is Margin & Leverage?

2020.03.10 OKX Academy

1. What is Margin?

Futures margin is a good-faith deposit, or an amount of capital one needs to post or deposit to control a futures contract.

There are 2 margin modes available in OKX: cross-margin and fixed margin. For cross-margin mode, the position margin required varies with the price movements. For fixed-margin mode, the position margin remains the same even the price fluctuates.

2. What is Leverage?

Leverage allows traders to enter a position which is worth much more by committing only a little amount of money. The gains or losses are therefore, greatly magnified. OKX currently provides choices of 10x and 20x leverages under full liquidation mode, and 1-100x leverages under partial liquidation mode. When a user holds 5 BTC and trades with a 10x or 20x leverage, he will bear the risks of a 50 BTC or 100 BTC trade. This magnifies the risk for 10x or 20x, but at the same time, it also increased the potential gains for 10x or 20x.

3. Can I Add Margin after Opening a Position?

In fixed margin mode, “auto margin” is disabled by default. User may choose to enable it by clicking the button in futures trading. When “auto margin” is enabled, our system will transfer funds from the futures account balance to the margin of the contract whenever its margin ratio reaches 10% (10x) / 20% (20x), which is also the initial margin, for full liquidation mode. For partial liquidation mode, our system will transfer funds from the futures account balance to the margin of the contract whenever its margin ratio is lower than the required maintenance margin ratio.

Then our system will try to recoup the margin ratio to 100% or as many as possible with the funds available in the futures account balance. And it will repeat this process whenever the margin ratio reaches the required maintenance margin ratio again. However, our system will not add the margin if it won’t help to avoid forced liquidation.

4. Can I Add Margin Manually?

Yes. However you may only do so in fixed margin mode. Disable “auto margin” and choose the amount of margin you would like to add to manage risk precisely.

Select the “+” icon under margin then you will see a pop-up window.

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.