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Introduction
Perpetual futures have become one of the most popular instruments in the cryptocurrency and derivatives markets. Unlike traditional futures contracts, perpetual futures do not have an expiration date, allowing traders to maintain positions indefinitely. This flexibility comes with responsibility: margin calculation. Understanding how to calculate margin for perpetual futures is essential for managing leverage, avoiding liquidation, and optimizing trading performance.
In this guide, we’ll provide a comprehensive breakdown of margin calculation for perpetual futures, covering initial margin, maintenance margin, cross vs. isolated margin, and practical strategies. We’ll also analyze different margin calculation methods, compare their strengths and weaknesses, and provide best practices based on real-world trading experience.
What Is Margin in Perpetual Futures?
Margin is the collateral traders must deposit to open and maintain leveraged positions in perpetual futures contracts. It ensures that traders have enough funds to cover potential losses.
- Initial Margin (IM): The minimum deposit required to open a position.
- Maintenance Margin (MM): The minimum balance required to keep the position open. Falling below this triggers liquidation.
Leverage amplifies both gains and risks. For example, with 10x leverage, a 1% move in the market can result in a 10% profit—or a 10% loss.
Types of Margin in Perpetual Futures
1. Initial Margin
The formula for calculating initial margin is:
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Initial Margin = Position Size ÷ Leverage
Example:
If you want to open a $50,000 BTC perpetual futures position with 10x leverage, your initial margin requirement is:
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$5