Margin Call - Trading Glossary

Margin calls on AsterDEX serve as early warning systems, alerting you when positions approach liquidation levels and providing time to take corrective action before forced closure.

Understanding Margin Calls

Margin Call Trigger Levels

Margin Call = When Available Margin < Warning Threshold

Typical thresholds:
- First Warning: 15% distance to liquidation
- Second Warning: 10% distance to liquidation  
- Final Warning: 5% distance to liquidation

Available Margin Calculation

Available Margin = Account Equity - Initial Margin Required - Maintenance Margin Buffer
Account Equity = Balance + Unrealized PnL

AsterDEX Margin Call System

Alert Mechanisms

Platform notifications:

• In-app popup warnings
• Email alerts to registered address
• SMS alerts (if enabled)
• Push notifications on mobile app

Warning levels:

• Yellow: 15% distance to liquidation
• Orange: 10% distance to liquidation
• Red: 5% distance to liquidation

Margin Call Actions

Immediate responses required:

1. Add funds: Deposit additional USDT/USDC
2. Reduce position: Close portion of position
3. Close entirely: Exit the full position
4. Hedge position: Add offsetting trades

Types of Margin Calls

Maintenance Margin Call

When it occurs:

• Position moves against you
• Unrealized losses reduce available margin
• Account equity approaches maintenance requirements

Time to respond:

• Typically 15-30 minutes before liquidation
• During extreme volatility: May have only minutes
• System provides countdown timer

Cross Margin vs Isolated Margin Calls

Cross Margin Calls:

• Account-level warnings
• All positions contribute to margin calculation
• One position’s loss affects entire account
• More complex to manage

Isolated Margin Calls:

• Position-specific warnings
• Each position managed independently
• Easier to respond to specific problems
• Clear action required per position

Responding to Margin Calls

Adding Margin (Recommended)

Fast deposits:

• Transfer from spot wallet to perpetual account
• Use cross-chain bridges for external funds
• Ensure sufficient margin for potential further moves

Margin calculation:

Required Additional Margin = (Target Distance × Position Value) - Current Available Margin
Target Distance: Recommended 20%+ to liquidation

Position Reduction

Partial closure strategy:

• Close 25-50% of position to reduce margin requirement
• Maintain exposure while improving risk profile
• Consider which positions to reduce first

Priority framework:

1. Worst performers: Close losing positions first
2. Highest risk: Reduce most leveraged positions
3. Lowest conviction: Exit positions you’re unsure about
4. Correlation: Reduce correlated positions together

Hedging Approaches

Temporary hedge:

• Short perpetual against long spot position
• Reduces directional risk while maintaining position
• Provides time to analyze market conditions

Options protection:

• Buy puts for long positions
• Buy calls for short positions
• Costs premium but provides defined risk

Margin Call Prevention

Position Sizing Rules

Conservative approach:

• Never use more than 50% of available margin
• Maintain 20%+ distance to liquidation at all times
• Size for 15-20% adverse price moves

Leverage guidelines:

Safe Leverage Ratio = Account Size ÷ Total Position Value < 0.5
Example: $10,000 account should have <$5,000 total exposure

Early Warning Systems

Set personal alerts at:

• 25% distance to liquidation (review positions)
• 20% distance to liquidation (prepare action plan)
• 15% distance to liquidation (take immediate action)

Risk Monitoring Tools

• Portfolio heat: Track total risk across all positions
• Correlation tracking: Monitor related position exposure
• Volatility alerts: Adjust position size during high VIX periods
• Economic calendar: Reduce exposure before major events

Advanced Margin Management

Dynamic Position Sizing

Volatility-adjusted leverage:

Adjusted Leverage = Base Leverage × (1 - Current VIX/100)
Example: If base leverage is 10x and VIX is 40, use 6x leverage

Portfolio Margin Optimization

Cross-margin benefits:

• Netting effect reduces total margin requirement
• Profitable positions support losing positions
• More capital-efficient for diversified strategies

Isolated margin benefits:

• Limited risk per position
• Easier margin call management
• Better for testing new strategies

Common Margin Call Mistakes

1. Ignoring warnings: Hoping the market will reverse
2. Averaging down: Adding to losing positions near liquidation
3. Emotional responses: Making hasty decisions under pressure
4. Poor prioritization: Not knowing which positions to close first
5. Insufficient reserves: No additional capital available for margin calls

Margin Call Response Plan

Create a written plan before trading:

Level 1 (15% to liquidation):

• Review all positions and market conditions
• Identify weakest positions for potential closure
• Prepare additional margin if needed

Level 2 (10% to liquidation):

• Take action: add margin OR reduce positions by 25%
• Focus on positions with least conviction
• Set tight stop losses on remaining positions

Level 3 (5% to liquidation):

• Immediate action: reduce positions by 50% minimum
• Consider closing all positions if trend against you
• Preserve capital over trying to recover losses

Margin Call Checklist

Before every leveraged trade:

1. ✅ Calculate liquidation price and margin requirements
2. ✅ Ensure sufficient reserves for margin calls
3. ✅ Set personal alert levels above exchange warnings
4. ✅ Plan specific responses for each warning level
5. ✅ Identify which positions to close first in emergencies
6. ✅ Maintain emergency capital for additional margin

During margin calls:

1. ✅ Stay calm and follow predetermined plan
2. ✅ Act quickly but don’t panic
3. ✅ Prioritize capital preservation
4. ✅ Learn from the situation for future trades

Margin calls are opportunities to prevent liquidation—treat them as valuable risk management tools, not just warnings to ignore.