What is margin level? Why is it so important in the cryptocurrency investment process? This is a common concern of many traders. If you also have questions similar to the above. Learn details about the margin level index with Learn Crypto Trading in the article below.

Introduction to Margin Trading in Crypto

To better understand forms of virtual currency investment trading activities. Trading Crypto will share with you some necessary concepts that you need to know during the investment process. Specifically as below.

What is margin level?

Margin level is one of the most important indicators in the virtual currency investment process. It represents the ratio between the owner’s available capital and the deposit amount. This index is also the amount of capital that traders can use to trade soon.

In addition, the margin level is a necessary indicator in the process of buying and selling cryptocurrencies. It accurately reflects the amount of money you can use to make transactions. In which, if the margin level is higher, the free margin is larger and the trading volume is also larger. If the margin level is lower, the free margin is smaller and the trading volume is smaller. In case your Free Margin is 0 or negative, you cannot trade.

If unfortunately, your margin level index drops below the initially specified threshold of 100% or lower. At this point, a margin call will appear and require additional margin or closing of existing positions. Additionally, if the margin level continues to decrease, all transactions will stop and open positions will automatically close to prevent negative balances.

See more: What is Margin? Optimize profits with Margin

What is margin trading?

Margin trading is a form of financial leverage investment. It helps you buy and sell tokens with an amount larger than the capital you currently hold. From there, you can earn a higher profit. However, this will come with more risks than regular transactions.

What is gross margin?

Gross margin is understood as the gross profit margin during the investment process. This index is calculated by dividing gross profit by revenue and then multiplying the result by 100% to get the percentage (abbreviated as GPM). This is the rate of profit that a business receives from the investment process after deducting other related fees.

In addition, What is staking coin index is also one of the important concepts in the process of investing in virtual currency that you need to know. To understand the meaning of this term, please refer to other articles at Trading Crypto.

What is margin level mean in investing?

After learning what is margin level, many new investors are curious about the meaning and benefits of this index. So what does this index mean in investing, please refer to the information below:

• Margin level helps traders know the remaining capital that they can use to participate in cryptocurrency transactions.
• You will not be able to make any transactions if the margin level index is negative or equal to 0.
• Margin level tells you whether you have enough capital to execute new orders or can continue to maintain open orders.

How to calculate margin level of what is margin level?

Knowing what is margin level is helps you understand that margin level is an important indicator in Crypto. Because it can help investors make accurate trading decisions. With modern trading platforms such as MT4, MT5, TradeStation,… can automatically calculate the margin trading level. Investors do not need to do complicated manual calculations with many numbers.

However, to understand more about margin level, you need to know how to calculate this index as well as gradually get familiar with related indexes. The specific formula for calculating the margin level index is as follows:

Margin level = (Equity / Used Margin) x 100% 

Below is a detailed guide on how to calculate the margin level that you should follow:

Step 1: Calculate the required margin amount

For example, you are looking to buy USD/JPY with 1 mini lot (10,000 units) and your margin requirement will be 4%. Now, how much deposit do you need to open a position?

According to the information shared before, USD is the base currency, this 1 mini lot is 10,000 USD. At the same time, the Notainal Value is 10,000 USD. This amount will be calculated as follows $10,000 x 0.04 = $400.

Step 2: Calculate the invested margin level

There are no other trades open other than the trades you have just entered. Since you only have one position open, the margin will be used as the required margin.

Step 3: Calculate investor capital

Suppose that the price at this time has a slight change that benefits your position and is in a breakeven state. This means that Floating P/L is currently $0. At this time, your equity will be calculated in the following way:

Equity = Account Balance + Floating Profit

Equivalent to $1000 = $1000 + $0

Through the above formula, it can be seen that the amount of money in your equity is currently at $1000.

Step 4: Calculate the margin level index (margin level)

Through the above information, we have the owner’s equity and other related numbers. So to calculate the margin level, you just need to apply this formula:

Margin level = (Equity / Uesed Margin) x 100%

Equivalent to 250% = ($1000 / $400) x 100%

Therefore, your margin level will now be 250%.

So just follow the steps above and you can quickly calculate the margin level index without asking for anyone’s help.

See more: Register MEXC account – Reputable Crypto broker

The impact of what is margin level is in trading

It can be seen that the margin level index greatly influences the management of categories as well as the decisions of investors. So,  the impact of what is margin level in trading? Let’s find out below:

• Accurately assess risk tolerance during the investment process.
• When this index drops below 100%, your account will not be able to open new positions.
• Determine your safe deposit level to make transactions more convenient and faster. Normally, a margin-level index of 100% or higher is safe.

Conclude

In the above article, Learn Crypto Trading has helped you answer the question What is margin level? Hopefully, the useful information above can help you better understand this important indicator in virtual currency investment. This helps you make investment transactions more conveniently and quickly. If you want to learn more about virtual currency investment, visit the Trading Crypto website for the opportunity to learn more useful lessons.

FAQs

After understanding exactly what is margin level and still have questions about other issues surrounding this indicator. At this time, you can refer to some information as below:

What is a good margin level?

A good and reasonable margin level is one above 100%. This shows that all your equity is equal to the used level. This is also the minimum margin level that helps you maintain open positions in the future.

Is the margin level important or not?

Margin level is one of the extremely important indicators in the process of investing in cryptocurrencies. Investors will use this margin level to know whether they have the opportunity to open additional positions or not.

How to increase the margin level index?

If the margin level index has not reached 100%, you can increase this index. To do this, you just need to add funds to your account to increase your equity. Or, you can also close some open positions to reduce the used margin.