About Margin Ratio
Margin Ratio refers to a figure that represents the risk of the position I hold in terms of a ratio. The margin ratio of all Bitcoin futures exchanges, including Binance Futures, ranges from 0% to 100%, and the closer it is to 100%, the higher the risk of forced liquidation of the position.
The image above is the margin ratio (Margin Ratio) of the Bitget exchange, and out of a total of 100%, the risk level of my position is 33.18%, which can also be interpreted as a 33.18% chance of position liquidation.
The margin ratio can decrease or increase depending on the coin futures market price and the current profit or loss (PnL). This is because if the current profit is negative, or if the coin price is close to the liquidation price, the risk increases, and so does the margin ratio.
Not only Binance and Bitget, but the margin ratio (margin risk) calculation formula is the same for all futures exchanges, so understanding it once will make it easy to apply on other exchanges.
Understanding the Margin Rate
If you look at the coin futures position trading history, you can see not only the Margin ratio but also the Margin Rate. Margin rate (Margin Rate) is, simply put, how much of the total position value is occupied by my margin.
The Margin Rate in the above image is 1.31%. This means that 1.31% of the total value of all positions, including leverage, is represented by the margin I have put in. The remaining 98.69% also represents the amount borrowed through leverage.
Also, the margin rate can vary slightly depending on the current profit (PnL). If there is a profit, this profit becomes my asset, and the value of the position increases. If there is a profit, the margin rate will increase, and if there is a loss, the margin rate will decrease.
Understanding MMR (Maintenance Margin Ratio)
The Maintenance Margin Ratio refers to the minimum balance that must be maintained in the futures wallet when trading with borrowed funds through leverage. However, the MMR can vary from exchange to exchange, including Binance.
For Bitget exchange, it is as follows:
Up to 125x leverage and $150,000, the MMR maintenance margin ratio is fixed at 0.40%. If it exceeds $150,000, you can only set up to 100x leverage, and the maintenance margin ratio increases.
Generally, if you trade futures on Bitget exchange with a small amount of 1 million won, MMR will be applied at 0.4%. If the Margin rate (Margin rate) falls below the MMR (Maintenance Margin Ratio), liquidation or partial liquidation is triggered.
Currently, it is 7.66%, and since MMR is 0.4%, it is relatively stable. Moreover, the margin ratio, which indicates the risk of the position, is also in the 5% range, so it can be seen that it is a stable position.
However, I would like to mention that these figures are merely risk numbers calculated through a simple formula, and if someone suddenly fires a liquidation beam, these figures will become meaningless.
Forced Liquidation Risk of Margin Ratio
There is information we have come to know through the maintenance margin ratio and margin rate. It is as follows:
High Maintenance Margin Ratio, Low Margin Rate
According to Binance and Bitget futures exchanges, as the value of the margin increases, the MMR margin ratio is set higher. Also, the more you use maximum leverage with a large margin, the lower the Margin rate (Margin rate) ratio becomes, reducing the difference between MMR and margin rate, thus increasing the risk.
Therefore, I would like to mention that using maximum leverage with a small amount has a slightly lower liquidation risk than with a large amount at maximum leverage.
The conclusion is resolved with Margin Ratio
In conclusion, since the Margin ratio comprehensively indicates the risk, when you trade Binance futures, you don’t need to check MMR or margin rate individually, just looking at the margin ratio is enough.