Initial Margin, Maintenance Margin

This post refers to isolated margin, as it's the way I trade, and I believe the safest.

Extremely important when you first start trading.

First, I know it's boring, but you should really go through your exchanges help sections and guides on just how they calculate things.

I've seen others say "you need to make sure your stop-loss triggers before your liquidation price is hit." The reason is, you lose your initial margin. But they never explain how much lower than your liquidation price should be that your stop-loss, or why. Why shouldn't I set use my liquidation price as my stop-loss? Isn't that the point... to liquidate my 1R, initial margin position when the price reaches my level?

First, Initial Margin allows you to OPEN a position. Maintenance Margin stops that position being CLOSED.

Under isolated margin, when position margin decreases to the maintenance margin level, the position is liquidated.

Hidden under the surface of all this is the maintenance margin. When your maintenance margin is hit, you position beings being liquidated. Depending on what how liquid your contract is, the maintenance margin will be higher or lower. In other words, your stop-loss can be very close to your liquidation price when trading BTC, but must be further away when trading alts.

Maintenance margin is NOT the same thing as initial, or position margin. In your Bybit dashboard you see price move away from your entry. You see your current unrealized loss at say, 30%. You rightly think that you will lose your initial margin once this reaches 100%, but it is less than that. You will lose your initial margin at about 80% or 90%.

This means that you are losing 100% of your initial margin, when price has only retraced to about 80% of it! You're giving 20% of your 1R to the exchange.

Your maintenance margin is always BELOW your initial margin.

Initial Margin is what we stand to lose on any given trade. Under isolated margin mode, the margin that you placed into a position is isolated from your account balance. If you have a $1,000 account, and you want to risk 1% of it per trade, $10 will be your initial margin, and is the maximum you will lose when the trade goes against you.

Initial Margin = Contract size x Entry Price / Leverage

Maintenance margin

Maintenance Margin = (Quantity of Contract / Entry Price) x Maintenance Margin Rate

The minimum margin to maintain a position is known as the Maintenance Margin, which is determined by the position size and the maintenance margin rate. A position will be liquidated when position margin drops to the maintenance margin level.

• Maintenance Margin (MM) is calculated using the maintenance margin rate (MMR)

• For all positions, the required maintenance margin is MMR * Contract value at the open position price.

So, if you are on Bybit, trading $AGI, or any coin,

and you click on this button,

and then, 'Risk Limits'

and then,

You will see,

This means that you need to have 2% of the Position Size as part of your Initial Margin at all times. If prices goes against you to the point that you have less than 2% margin left, the position gets liquidated.

If our maintenance margin gets hit, our initial margin gets liquidated, and maintenance margin is ALWAYS lower than initial margin. This means we need our stop-loss to get triggered BEFORE our MAINTENANCE margin gets hit. Formulas For Buy/Long: Liquidation Price (LP) = [Entry Price × (1 - Initial Margin Rate + Maintenance Margin Rate)] - (Extra Margin Added/ Contract Size) For Sell/Short: Liquidation Price (LP) = [Entry Price × (1 + Initial Margin Rate - Maintenance Margin Rate)] + (Extra Margin Added/ Contract Size) Note:

— Initial Margin Rate (IMR) = 1/leverage — The Maintenance Margin Rate (MMR) is based on the risk limit tier. Example 1 (Long): Trader A placed a long entry of 1 BTC at 20,000 USDT with 50x leverage. Assuming no extra margin is added: IMR = (1/50) = 2% MMR = 0.5% LP = 20,000 USDT × ( 1 - 0.02 + 0.005 ) = 19,700 USDT Example 2 (Short): Trader B initially placed a short entry of 1 BTC at 20,000 USDT with 50x leverage. Subsequently, he manually added 3,000 USDT more to his position margin. The new Liquidation Price after the margin is added will be calculated as follows: IMR = (1/50) = 2% MMR = 0.5% LP = [ 20,000 USDT × (1 + 0.02 - 0.005) ] + (3000/1) = 23,300 USDT

https://www.bybit.com/en-US/help-center/bybitHC_Article?id=000001164&language=en_US

https://www.bybithelp.com/en-US/s/article/Liquidation-Process-USDT-Contract

https://www.youtube.com/watch?v=OgH_KPv5aaA

Auto-Margin Replenishment Process

Unlike cross margin mode which uses all the available balance to calculate the liquidation price, traders will be notified when AMR is triggered and this allows traders to have time to better manage their position.