Margin Ratio
Published Last updated
Key Takeaway
The current margin balance divided by the maintenance margin requirement, expressed as a percentage; when the margin ratio reaches 100%, the exchange triggers liquidation; real-time monitoring of margin ratio is the core operational discipline for managing leveraged positions.
Learn These First
What Is Margin Ratio?
The current margin balance divided by the maintenance margin requirement, expressed as a percentage; when the margin ratio reaches 100%, the exchange triggers liquidation; real-time monitoring of margin ratio is the core operational discipline for managing leveraged positions.
How Margin Ratio Works
Frequently Asked Questions
What is margin ratio in simple terms?
Margin ratio tells you how far your leveraged position is from being automatically liquidated. It is your current margin balance divided by the minimum margin required to keep the position open (maintenance margin), expressed as a percentage. A margin ratio of 200% means you have twice the minimum required — relatively safe. A margin ratio of 110% means you are very close to the liquidation threshold. When the ratio reaches exactly 100%, the exchange automatically closes your position. It is the most important number to monitor in any open leveraged trade.
How does margin ratio work in crypto derivatives?
Margin ratio is calculated continuously as price moves. When price moves in your favor, unrealized gains are added to your margin balance, raising the ratio. When price moves against you, unrealized losses reduce the balance, lowering the ratio. In isolated margin mode, each position has its own ratio calculated from that position's assigned margin. In cross margin mode, the ratio uses the total account balance across all positions. On Binance and most major exchanges, margin ratio is displayed in real time in the positions panel.
How do traders use margin ratio to manage risk?
Experienced traders manage margin ratio systematically with three practices: (1) Before opening a position, calculate the adverse price move that would bring the margin ratio to their alert threshold — this defines the position's risk distance. (2) Set exchange alerts at a personal warning level such as 130% so they receive notification before approaching liquidation. (3) Pre-define the response to that alert: add margin if the trade thesis remains valid based on current price structure, or exit the position at market if the thesis has been invalidated. This decision is made before opening the trade, not under duress during a loss.
Common Misconceptions About Margin Ratio
A high margin ratio means the trade is profitable
Margin ratio measures distance from liquidation, not profitability. A position can have a high margin ratio because the trader allocated a large margin to it — not because it is profitable. Conversely, a position can be slightly profitable but show a low margin ratio if the margin allocation is thin relative to the maintenance requirement. Profitability is measured by unrealized P&L. Margin ratio is a risk metric: it tells you how much further price can move against you before the exchange intervenes.
Margin ratio of 150% means I have 50% price movement before liquidation
Margin ratio of 150% does not translate directly to a 50% price movement buffer. The price buffer depends on leverage. At 10x leverage, a 150% margin ratio with 0.5% maintenance margin means the margin balance is 1.5× the maintenance floor — which translates to roughly a 5% additional adverse move before liquidation, not 50%. Always calculate the liquidation price in absolute terms (using the liquidation price formula) rather than inferring price distance from the margin ratio percentage alone.
Cross margin mode always prevents liquidation better than isolated margin
Cross margin delays individual position liquidation by drawing on the full account balance, but it introduces a different and more severe risk: a catastrophic move in one position can liquidate the entire account, including positions that were profitable. In isolated margin mode, a losing position can only consume its own assigned margin — the rest of the account is protected. For most retail traders managing directional speculative positions, isolated margin with disciplined margin ratio monitoring provides better overall risk control than cross margin.