Cross Margin + Margin Ratio
Imagine you have an investment portfolio in futures markets, and you place all your available capital as collateral for multiple positions simultaneously.
This is what we call cross margin:
Instead of allocating a fixed amount of collateral for each individual position (as is the case with isolated margin), you are using the total balance of your account as collateral shared by all positions.
And this is where the Margin Ratio comes into play, which acts as an indicator of the financial health of your portfolio at that moment.
When you use cross margin, the margin ratio is calculated based on the total value available in your account — including balances, unrealized profits, and losses.
If the market moves against you, all positions can be affected because they are using the same pool of collateral.
As the account balance decreases (due to losses), the percentage of liquidation risk in the margin ratio increases. This serves as a warning signal: the higher it is, the closer you are to an automatic liquidation of positions.
And here comes the “trick”: Do you know what the total Margin Ratio recommended by most trading pairs is, for you to operate almost without liquidation risk?
From 1.7% to 2.0%. 🤯
Above that, the risk of liquidation is imminent.
I hope this helps.
As I always say, your most valuable token is your capital, so protect it.
A strong hug.
