What Is Margin?
Margin is the collateral (typically USDT or the traded asset) that a trader deposits to open a leveraged position. It acts as a security deposit — if the position moves against you, losses are deducted from your margin. If your margin drops below the maintenance requirement, the position is liquidated.
How Margin Works
Two main margin modes exist:
- Isolated Margin — Each position has its own margin. If liquidated, you lose only the margin assigned to that trade.
- Cross Margin — Your entire account balance serves as margin for all positions. Higher liquidation buffer, but a losing trade can drain your whole account.
Initial margin is the amount required to open a position. Maintenance margin is the minimum required to keep it open.
Why It Matters for Traders
Understanding margin mechanics prevents catastrophic losses. New traders often use cross margin without realizing a single bad trade can wipe their account. Isolated margin limits downside to the amount allocated to each trade. Professional risk management always starts with margin mode selection and sizing margin relative to account equity.