Margin

Margin is collateral deposited to open and maintain a leveraged trading position, serving as a security buffer that protects the counterparty (exchange or protocol) from losses exceeding your equity. Initial margin is the amount required to open a position, with 10x leverage on a $10,000 position, you might need $1,000 initial margin. Maintenance margin is the minimum equity required to keep the position open, typically lower than initial margin. If your position moves against you and equity falls below maintenance margin, liquidation occurs: the position is forcibly closed and your remaining margin is used to settle the loss, often with a penalty. Cross-margin uses your entire account balance as margin for all positions, maximizing capital efficiency but risking your whole account on any position. Isolated margin limits each position's margin to what you explicitly allocate, containing risk but reducing flexibility. Margin calls in traditional finance give you time to add collateral; in crypto, liquidation is often immediate and automatic. Understanding margin requirements is essential for leveraged trading: different assets have different requirements based on volatility, position sizes affect available margin, and margin utilization indicates how close you are to liquidation risk.