1. Warehouse by warehouse mode
The margin required by the investor when opening a position will be used as the fixed margin for the contract.
When the margin-by-position margin mode is adopted, users can hold positions in both directions, and the risks of short positions and long positions are calculated independently, and the two-way positions of each contract will be independently calculated for its margin and income.
Advantages of the warehouse-by-warehouse model: users will only lose the position margin when they liquidate their positions, that is, the margin of the position guarantee is the user's greatest loss. Only the amount of margin held in this direction will be lost, and other funds in the contract account will not be affected.
Currently, the coinidc HBTC perpetual contract adopts a warehouse-by-warehouse model, and users can flexibly adjust the margin ratio after successfully placing an order.
2. Full warehouse mode
All the balances of investors transferred to the contract account and the profit and loss generated by all contracts will be used as the contract's holding margin.
When the cross-margin mode is adopted, the risks and returns of all positions in the account will be combined and calculated. When the position loss exceeds the account balance, the position will be liquidated.
Advantages of the full position model: the account has a strong ability to carry losses, which is convenient for operation and calculation of positions, so it is often used for hedging and quantitative trading.
3. Comparison of the two
The wide position mode is relatively difficult to liquidate under low leverage and volatile market conditions, but when encountering major market conditions or some uncontrollable factors cannot be traded, it is likely that all funds in the account will be returned to zero.
The warehouse-by-warehouse mode is more flexible than the full-warehouse mode, but it is necessary to strictly control the distance between the liquidation price and the marked price, otherwise a single position may be easily liquidated and cause losses.
Both A and B use USD 2000 and 10 times leverage to do long BTC/USDT contracts.
A uses the warehouse-by-warehouse mode, occupying USD 1,000 in margin, and B uses the full-warehouse mode;
Suppose that the strong parity of A is $8,000, and the strong parity of B is $7,000;
If BTC suddenly drops to USD 8,000, account A loses USD 1,000 in the margin and is forced to liquidate the position, losing USD 1,000 and remaining USD 1,000.
And B uses the full position model, after a loss of $1,000, the long position is still there. At this time, if the price rebounds, B may turn losses into profits, but if the price continues to fall, it may lose all of the $2,000.