How Margin Works in Crypto
When you open a leveraged trade you don't pay for the full position. You lock a portion of your balance as margin, and that margin backs the position's full notional value. Two thresholds govern the trade from open to close.
Initial margin is the minimum you must post to open the position. At 10x the initial margin is 10% of the notional; at 5x it's 20%. It's set by the leverage you choose.
Maintenance margin is the minimum equity the position must keep to stay open. Fall below it and the exchange liquidates you. It's a small percentage of notional — often under 1% on liquid pairs — rising as your position gets larger.
The gap between your current equity and the maintenance level is your survival buffer. As the price moves against you, that buffer shrinks. When it hits zero you're liquidated — see maintenance margin for exactly how the trigger fires.
Borrowed Funds, Simply
Picture margin as a security deposit on borrowed buying power. The exchange isn't lending you coins to keep; it's letting you take on exposure many times your deposit, holding your margin as the guarantee. If the position profits, the gain is yours on the full size. If it loses, the loss comes out of your margin first — and the exchange force-closes the trade before the loss can exceed what you posted.
This is why margin and leverage are two sides of one coin. Margin is the deposit; leverage is how many times that deposit gets multiplied into position size. Choosing 10x leverage is the same decision as posting 10% initial margin. See leverage trading for the multiplier side.
| Isolated Margin | Cross Margin | |
|---|---|---|
| What's at risk | Only the margin assigned to that position | Your entire futures wallet balance |
| Liquidation price | Closer to entry — backed by one position | Further from entry — whole balance backs it |
| When it hits | Just that position closes | Can drain the whole account |
| Best for | Capping risk per trade | Holding one core position with full backing |
Worked Example
You have $2,000 in USDT and want to long ETH at $3,000 using 5x. That's 20% initial margin: to open a $10,000 ETH position (about 3.33 ETH of notional) you post your whole $2,000 as initial margin.
ETH rises to $3,300 (+10%). Your position gains $1,000, equity is now $3,000 — a 50% return on margin. But ETH could just as easily fall to $2,700 (-10%): the position loses $1,000, equity drops to $1,000, and you're now much closer to the maintenance line.
Keep falling toward roughly $2,460 and equity nears the maintenance margin — the exchange liquidates before the loss exceeds your $2,000.
Lower leverage — say 2x — would have demanded more initial margin but pushed the liquidation point much further away, giving ETH room to recover. Capital used vs room to survive is the core trade-off in margin trading.
Common Mistakes
- •Treating initial margin as the most you can lose. In a fast, gapping market, slippage on the liquidation can eat slightly past your margin on some products.
- •Maxing out initial margin on one trade. Posting your entire balance on a single position leaves no buffer for volatility and no dry powder for the next setup.
- •Forgetting funding. On perpetuals you pay or receive funding while the position is open — held long enough, it can drag a flat trade into a loss.
- •Confusing margin with leverage. They move together: more leverage means less initial margin posted and a liquidation price closer to entry.
How This Shows Up in Your Trading Journal
Margin math is invisible in the moment — you see a position, not the eroding buffer behind it. A journal makes it concrete.
Tradermake.money imports every trade with its margin, leverage, and the risk you carried, so you can review not just whether a trade won but how close it came to the maintenance line. Because it reads funding and fees straight from the exchange, the PnL it reports is the true net figure after the real cost of carrying a margined position — where your margin is working, and where it's quietly bleeding to funding.