What is Futures Margin Call on Binance?

If anyone has ever traded Futures on Binance, you may have encountered the term Margin Call but are still confused about what it is. Today we will tell you in a simple way. With clear examples

Simply put, Margin Call is a warning that your Futures trading account is about to run out! Because the market is running in the wrong direction. Then the money we use to guarantee trades (called Margin) becomes insufficient. If we leave it alone, the money in our account may be completely eaten up. Or what is called having the port cleared (Liquidation)

When we open a futures trade, we use some money as collateral (Initial Margin) and must maintain a minimum amount of money in the account (called Maintenance Margin). If the market runs against what we expected until the money in the account is lower than the Maintenance Margin, the system will send a Margin Call to warn you, “Be careful! Top up or close your status? Otherwise, I'll definitely clean the port."

Let's say you go long (buy) Bitcoin at $30,000 using 10x leverage (1 coin can be traded like you have 10 coins)
Using $1,000 as collateral (Initial Margin), your position value will be $1,000 × 10 = $10,000

Why does Margin Call occur?

Maintenance Margin or the minimum money required by the Binance platform is set at 0.5% of the position value, which is
$10,000 × 0.5% = $50

If the market goes down until the account balance is less than $50, the system will immediately issue a Margin Call alert

For example, Bitcoin price falls from $30,000 to $29,500
You lose = ($30,000 – $29,500) × 10 = $500
Account remaining = $1,000 – $500 = $500

which can still be traded. There are no notifications. But if the loss is greater than this until the money in the account is close to Maintenance Margin ($50), the system will notify Margin Call for you to take immediate action. There will be both a warning message in the Binance app and an email notification as well, so you don't miss out

How to prevent Margin Call from occurring?

• Set Stop Loss: Help cut losses before the money runs out
• Add more money: If you don't want your portfolio to be wiped out, add Margin
• Reduce leverage: Use small amounts of leverage. It will reduce the risk. (but when entering the trade If the leverage is set to a high level, it cannot be adjusted to a low level. You must plan your trading first. Be careful about using leverage.)

In summary, Margin Call is a warning signal that the money in the account is almost depleted. If you don't want your portfolio to be wiped out, you should set a Stop Loss or manage your position well. Futures trading has both profit and risk opportunities. Don't forget that if the market moves in the wrong direction, The port may be cleared in the blink of an eye

Trade mindfully. And don't use money that you've lost and get into trouble.