Bitget USDT-Margined Futures
Dear Global Bitgetters,
1. Margin Trading: What is it?
To put it simple, Margin Trading allows traders to engage in futures trading activities without having a lot of cash at hand. You’ll need to deposit a particular amount based on the contract value to start with; the rest can be borrowed for an amplification effect, i.e. increasing buying power.
Margin trading encourages traders to reevaluate their positions on a daily basis: traders whose account balance falls below a required amount will have to pay up for their uncovered exposure as fast as possible, or else the exchange can close out any open positions until the account balance meets the minimum value. Traders can also voluntarily exit some less favourable positions instead of depositing more equity into their accounts.
Futures contracts on Bitget are mostly perpetual, meaning they do not have a concrete expiry date. It is completely up to traders how long they want to hold the contract, hence creating an impressively liquid market (entrance and exit made easy at very low costs). Moreover, perpetual contracts are written on an asset’s index price, which equals the average price of that particular asset with respect to its spot price and trading volume.
Fund Fee, also known as Funding Rate, is a crypto-specific term. As perpetual contracts have no expiry, profits and losses cannot be calculated in the same way as normal futures contracts. Fund Fees on Bitget are traders’ profits/losses, updated and realised every 8 hours based on the price difference between perpetual market and spot market. Bitget does not charge this fee; it is paid into winning accounts with funds taken from losing accounts, depending on the open positions. More information about fund fees is available here.
2. Important terms you’ll come across
There are some significant terms related to margin trading that will help you get acquainted with the process faster as belows:
Types of Margin
The five different types of margin on Bitget include: Initial margin, Maintenance margin, Variation margin, Available margin and Risk margin. Initial margin is the bare minimum amount of equity that needs depositing before you can open any position, which plays the role of a guarantee for the counterparty. Maintenance margin is the minimum amount of equity to be maintained in the account during the life of each contract and is always lower than the initial margin. Variation margin is the difference between the initial margin and the current (margin) balance and is to be calculated in case of a margin call, i.e. when the account balance falls below the required maintenance margin. Our users will see available margin as the total amount of equity available for placing new trades everyday.
Risk margin appears the most complicated out of these five. It represents the actual delivery obligations one trader has.
Consider the following example: John wants to long 5 BTC on Bitget because the conditions are favourable. However, due to high volatility he also tries to offset this long position by taking a short position of 2 BTC and consequently reducing his obligations of delivering all 5 BTC in case prices drop. Consequently, the maximum amount of BTC to be delivered when BTC prices decrease is 3 BTC, reflecting the maximum level of John’s risk margin.
Modes of Margin
As a leading derivatives exchange in the crypto space, Bitget makes both Isolated Margin mode and Cross Margin mode available for all users.
In the Isolated Margin mode, each position will be allotted a specific margin and correspondingly an independent Isolated Margin account. The initial margin for Isolated Margin accounts is completely separated from each other and from available margin. This option encourages traders to proactively manage their individual positions and is designed for highly speculative trading, as the maximum loss possible is restricted to the Isolated Margin balance only.
Cross Margin means all positions can have access to one joint margin pool, meaning traders can tap into all available equities in their margin account. Please note that with cross margin on Bitget, one trader may have several margin pools of different cryptocurrencies. Only open positions with the same settlement (crypto-)currency can make use of the corresponding joint pool.