How to calculate margin for DigiFinex contract?

Margin calculation in DigiFinex contracts involves multiplying the margin requirement by the contract's face value, providing a critical understanding for managing risk and potential profits in margin trading activities.

Nov 24, 2024 at 08:22 am

Understanding Margin in DigiFinex Contracts

Margin trading in DigiFinex contracts involves utilizing borrowed funds to increase potential profits. Before venturing into margin trading, it's crucial to grasp the concept of margin and how it's calculated. This comprehensive guide will delve into the intricacies of margin calculation for DigiFinex contracts.

Steps to Calculate Margin for DigiFinex Contracts

1. Identify the Contract's Margin Requirement:
   Each contract on DigiFinex has a specific margin requirement expressed as a percentage. This requirement indicates the minimum amount of funds needed to open and maintain a position. For instance, if a contract has a margin requirement of 10%, you'll need to deposit 10% of the contract's face value as margin.
2. Determine the Contract's Face Value:
   The face value of a contract represents the underlying asset's notional value, multiplied by the contract size. For example, if a Bitcoin (BTC) contract has a face value of $10,000 and a contract size of 1 BTC, the face value is $10,000.
3. Calculate the Margin Amount:
   Once you know the margin requirement and the contract's face value, calculating the margin amount is straightforward. Simply multiply the margin requirement by the face value. Using the previous example, if the margin requirement is 10%, the margin amount would be $1,000 ($10,000 x 0.1).
4. Margin Level:
   The margin level refers to the ratio of your account's equity to the margin used. It indicates the extent to which your account is leveraged and the risk of a margin call. A higher margin level means lower risk. To calculate the margin level, divide your account's equity by the margin amount.
5. Maintenance Margin:
   Maintenance margin is a critical concept in margin trading. It represents the minimum margin level required to keep a position open. If your margin level falls below the maintenance margin, you may face a margin call. Check the specific contract's terms to determine its maintenance margin.
6. Initial Margin:
   Initial margin is the amount of margin required to open a new position. It's typically higher than the maintenance margin, providing an initial buffer against market fluctuations. DigiFinex usually requires an initial margin of 2x the maintenance margin.