What is margin in trading?
Leverage is the number everyone quotes; margin is the number that actually decides whether you survive. Most beginners learn the difference between initial and maintenance margin at the moment a position is liquidated with money "still in it". This guide is so that you learn it before.
What is initial margin?
The collateral the exchange takes from your balance when you open a position: notional value divided by leverage. Open $10,000 of BTC at 10× and $1,000 of your balance is locked as initial margin; the other $9,000 is borrowed, in effect, from the exchange. The margin is not a fee — it is returned, plus or minus the trade's profit or loss, when the position closes.
| Notional position | Leverage | Initial margin | What 1% against you costs | As % of margin |
|---|---|---|---|---|
| $10,000 | 2× | $5,000 | $100 | 2% |
| $10,000 | 10× | $1,000 | $100 | 10% |
| $10,000 | 25× | $400 | $100 | 25% |
| $10,000 | 50× | $200 | $100 | 50% |
The dollar loss on a 1% move is the same at every leverage; what changes is how much of your margin it consumes.
What is maintenance margin, and why does it matter more?
The minimum equity the exchange insists you keep in the position, set as a percentage of notional — often around 0.5% for large coins at low tiers and higher for altcoins and large positions. Your equity in the position is the initial margin plus unrealised profit or minus unrealised loss. When it falls to the maintenance level, liquidation begins. Because the maintenance requirement is small, the gap between initial and maintenance margin is almost the whole of the initial margin: that gap is your room for error, and leverage decides how wide it is in price terms.
| Leverage (isolated, $10,000 long at $60,000) | Initial margin | Maintenance (0.5% of notional) | Room before liquidation | Price move that uses it up |
|---|---|---|---|---|
| 10× | $1,000 | $50 | $950 | −9.5% → about $54,300 |
| 25× | $400 | $50 | $350 | −3.5% → about $57,900 |
| 50× | $200 | $50 | $150 | −1.5% → about $59,100 |
Room = initial − maintenance; price move = room ÷ notional. Fees and funding narrow the gap further, and the exchange liquidates against mark price, not last price.
Isolated or cross margin — which should a beginner use?
Isolated. In isolated mode the position can lose only the margin assigned to it; the rest of the account is untouched. In cross mode the whole available balance backs every open position, which delays liquidation but means one bad trade can drain everything. Cross margin is a tool for experienced traders who manage several positions as a book; for a beginner it converts a contained loss into a total one. Isolated vs cross margin walks through the same trade in both modes.
What does "margin call" mean in crypto?
Very little, in practice. Traditional brokers call to ask for more collateral before closing you out; crypto exchanges do not call. Some send a warning notification when equity approaches maintenance; then the liquidation engine takes over, closing the position at market and charging a liquidation fee. In a fast move the engine may close you below the maintenance level, and in an extreme one the exchange's insurance fund or auto-deleveraging covers the shortfall. The practical rule is that the liquidation price shown when you open the trade is the real stop, whether you set one or not — so set your own stop well above it, or size the position so the liquidation price is far away.
FAQ
What is the difference between initial and maintenance margin? Initial margin is what you must post to open a position (notional ÷ leverage). Maintenance margin is the smaller minimum you must keep as the position moves against you; reaching it triggers liquidation.
Can I lose more than my margin? In isolated mode, no — the position is closed when the assigned margin is exhausted, and most exchanges cover any remaining gap from an insurance fund. In cross mode the loss can consume your whole available balance.
What happens when margin falls below maintenance? The exchange liquidates the position automatically at market, usually charging a liquidation fee. There is no margin call in the traditional sense.
How do I calculate my liquidation price? Roughly, entry price minus (initial margin − maintenance margin) ÷ position size for a long. The liquidation price calculator does it exactly, including the maintenance rate.
Find your liquidation price before you open the trade
Entry, leverage, size and maintenance rate in; liquidation price and distance out.
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Margin is the mechanism behind every number in the leverage lesson. Leverage and margin explains what you are borrowing, liquidation describes what the engine does when maintenance is breached, and mark price is the price it uses to decide.