Margin Maintenance Ratio

The Margin Maintenance Ratio is the minimum amount of equity that must be held in a trading account to keep a position open. If the account equity falls below this level due to price movements, the exchange will trigger a liquidation event.

This ratio is a core component of the margin engine in crypto derivatives protocols. It ensures that the protocol remains solvent even if a trader's position moves deeply into the red.

Traders must monitor this ratio closely, especially when using high leverage, as it determines the distance to liquidation. The ratio varies between different assets and exchanges, reflecting the underlying volatility and liquidity risks.

Understanding this ratio is vital for calculating the true risk of a trade. It dictates the amount of buffer a trader has against adverse price swings.

Effective management of this ratio is essential for avoiding forced liquidations during flash crashes. It is a fundamental technical constraint in all leveraged trading environments.