Effective margin management is essential for successful trading on MegaTAO. This section covers margin requirements, margin ratio calculations, and best practices for maintaining healthy margin levels.
Understanding Margin
What is Margin?
Margin is the collateral required to open and maintain leveraged positions.
Initial Margin : Required to open a position
Maintenance Margin : Minimum required to keep position open
Available Margin : Excess margin above requirements
Margin Ratio : Percentage of margin remaining relative to position value
Copy Margin Ratio = (Position Value - Unrealized Loss + Available Margin) / Position Value Types of Margin
Required to open a position:
Calculation : Position Size ÷ Leverage
Purpose : Ensures sufficient collateral
Locked : Locked in the position
Release : Released when position is closed
Maintenance Margin
Minimum required to keep position open:
Rate : 20% of position value
Purpose : Prevents liquidation
Monitoring : Continuously monitored
Action : Add margin if ratio falls below 20%
Available Margin
Excess margin above requirements:
Calculation : Total Margin - Initial Margin
Usage : Can be used for new positions
Withdrawal : Can be withdrawn if not needed
Management : Should be managed carefully
Margin Ratio Calculation
Basic Calculation
The margin ratio indicates the health of your position:
Example Calculation
Margin Ratio : ($10,000 - $500 + $2,000) / $10,000 = 115%
Margin Ratio Levels
Healthy (> 35%)
Status : Position is healthy
Action : No action required
Risk : Low risk of liquidation
Recommendation : Continue monitoring
Caution (25-35%)
Status : Position needs attention
Action : Consider adding margin
Risk : Moderate liquidation risk
Recommendation : Monitor closely
Danger (20-25%)
Status : Position is at risk
Action : Add margin immediately
Risk : High liquidation risk
Recommendation : Take immediate action
Liquidation (< 20%)
Status : Position will be liquidated
Action : Position automatically closed
Risk : Total loss of margin
Recommendation : Prevent at all costs
Margin Requirements by Leverage
Leverage and Margin Relationship
Higher leverage requires less initial margin but increases liquidation risk:
Leverage
Initial Margin
Position Size per $100 Margin
Liquidation Risk
Margin Requirements Examples
Example 1: 5x Leverage
Initial Margin : $5,000 ÷ 5 = $1,000
Maintenance Margin : $5,000 × 20% = $1,000
Liquidation Price : Entry Price × (1 - 0.20 / 5) = Entry Price × 0.96
Example 2: 10x Leverage
Initial Margin : $10,000 ÷ 10 = $1,000
Maintenance Margin : $10,000 × 20% = $2,000
Liquidation Price : Entry Price × (1 - 0.20 / 10) = Entry Price × 0.98
Example 3: 30x Leverage
Initial Margin : $30,000 ÷ 30 = $1,000
Maintenance Margin : $30,000 × 20% = $6,000
Liquidation Price : Entry Price × (1 - 0.20 / 30) = Entry Price × 0.993
Margin Management Strategies
Conservative Approach
Maintain high margin ratios for safety:
Strategy Parameters
Target Margin Ratio : 50%+
Minimum Margin Ratio : 35%
Low Risk : Minimal liquidation risk
Peace of Mind : Less stress and worry
Learning : Allows learning without excessive risk
Capital Preservation : Protects trading capital
Lower Returns : Reduced potential returns
Opportunity Cost : May miss profitable opportunities
Capital Efficiency : Less efficient use of capital
Moderate Approach
Balance risk and return:
Strategy Parameters
Target Margin Ratio : 35-50%
Minimum Margin Ratio : 25%
Balanced Risk : Good balance of risk and return
Flexibility : Allows for various trading strategies
Growth Potential : Good growth potential
Experience : Suitable for experienced traders
Higher Risk : More risk than conservative approach
Monitoring : Requires closer monitoring
Experience Required : Needs trading experience
Aggressive Approach
Maximize capital efficiency:
Strategy Parameters
Target Margin Ratio : 25-35%
Minimum Margin Ratio : 20%
Leverage : 10x-30x maximum
High Returns : Maximum potential returns
Capital Efficiency : Most efficient use of capital
Expert Use : For expert traders only
Opportunity : Can capitalize on major opportunities
High Risk : Significant liquidation risk
Expert Required : Only for expert traders
Stress : High emotional stress
Monitoring : Requires constant monitoring
Adding and Removing Margin
Adding margin improves your margin ratio and reduces liquidation risk:
When to Add Margin
Low Margin Ratio : When ratio falls below 30%
Liquidation Risk : To prevent liquidation
Position Sizing : To increase position size
Risk Management : To improve risk profile
How to Add Margin
Select Position : Choose the position to modify
Add Margin : Click "Add Margin" option
Enter Amount : Specify how much TAO to add
Confirm Transaction : Approve the transaction
Verify Update : Check that margin ratio improved
Adding Margin Examples
Example 1: Improving Margin Ratio
Current Position : $10,000 position with $1,000 margin
Current Ratio : 10% (dangerous)
New Ratio : 30% (caution level)
Example 2: Increasing Position Size
Current Position : $5,000 position with $1,000 margin
New Position Size : $10,000 (same leverage)
Removing Margin
Removing margin frees up capital but increases liquidation risk:
When to Remove Margin
Excess Margin : When margin ratio is very high (>100%)
Capital Needs : When you need capital for other positions
Risk Reduction : To reduce overall risk exposure
Profit Taking : To realize some profits
How to Remove Margin
Select Position : Choose the position to modify
Remove Margin : Click "Remove Margin" option
Enter Amount : Specify how much TAO to remove
Confirm Transaction : Approve the transaction
Verify Update : Check that margin ratio is still healthy
Removing Margin Examples
Example 1: Freeing Up Capital
Current Position : $10,000 position with $5,000 margin
Current Ratio : 50% (healthy)
New Ratio : 30% (caution level)
Example 2: Profit Taking
Current Position : $10,000 position with $3,000 margin
Unrealized Profit : $1,000
Remove Margin : $1,000 (realize profit)
New Ratio : 20% (danger level)
Margin Monitoring
Real-time Monitoring
Essential practices for monitoring margin:
Key Metrics to Track
Margin Ratio : Current margin ratio
Available Margin : Excess margin available
Liquidation Price : Price at which position liquidates
Unrealized P&L : Current profit/loss
Monitoring Frequency
Active Trading : Monitor continuously during active trading
Daily Check : Check positions daily
Weekly Review : Weekly review of all positions
Monthly Analysis : Monthly analysis of margin management
Dashboard : Real-time margin dashboard
Alerts : Automated margin alerts
Reports : Margin management reports
Analysis : Margin analysis tools
Early Warning System
MegaTAO provides early warnings before liquidation:
30% Margin Ratio : First warning - consider adding margin
25% Margin Ratio : Serious warning - add margin or close position
22% Margin Ratio : Final warning - immediate action required
20% Margin Ratio : Liquidation triggered
Warning Actions
Add Margin : Deposit more TAO to improve margin ratio
Close Position : Close position to prevent liquidation
Reduce Size : Reduce position size to improve margin ratio
Monitor Closely : Watch position more carefully
Common Margin Management Mistakes
Common mistakes in margin management:
Over-Leveraging
Problem : Using too much leverage
Cause : Greed, overconfidence, lack of experience
Solution : Use appropriate leverage levels
Prevention : Set leverage limits
Ignoring Margin Ratio
Problem : Not monitoring margin ratio
Cause : Lack of discipline, overconfidence
Solution : Monitor margin ratio regularly
Prevention : Set up automated alerts
Adding Margin Too Late
Problem : Adding margin only when liquidation risk is high
Cause : Procrastination, hope that price will recover
Solution : Add margin early when ratio gets low
Prevention : Set action levels
Removing Margin Too Early
Problem : Removing margin when position is profitable
Cause : Greed, lack of patience
Solution : Keep margin in profitable positions
Prevention : Set profit-taking rules
Watch for these warning signs:
Margin Ratio Declining
Sign : Margin ratio consistently declining
Action : Add margin or close position
Prevention : Regular monitoring
Frequent Margin Calls
Sign : Frequently needing to add margin
Action : Reduce position size or leverage
Prevention : Better position sizing
Emotional Margin Management
Sign : Adding margin based on emotions
Action : Return to systematic approach
Prevention : Automated margin management
Now that you understand margin management, continue to:
⚠️ Important Note : Margin management is crucial for preventing liquidations. Always maintain healthy margin ratios and monitor your positions closely. Never let your margin ratio fall below 25% without taking action.