Margin

Initial margin and maintenance margin

• Initial margin is the amount needed to open the position.
• Maintenance margin is the minimum that must remain while the position is open. It is lower than the initial margin.

When the price moves against you, the loss is taken from the margin. If it falls below the minimum, the position is closed automatically in a LiquidationLiquidationWhen a loan or leveraged position is closed automatically because the collateral or margin no longer covers the debt.. The price at which that happens is the liquidation priceLiquidation priceThe price of a crypto at which a loan or leveraged position is closed automatically. The closer it is to the current price, the higher the risk..

Margin calls

With traditional brokers, a margin call often comes before the position is closed. You are told that your margin is too low and asked to add money or reduce the position. In crypto markets this often happens so fast that no margin call arrives, and the position is simply closed.

Isolated or cross margin

Many exchanges offer two options:

• Isolated margin. Each position has its own margin. If the position is closed, only that margin is lost.
• Cross margin. Your whole balance stands behind all your positions. That makes it less likely that a single position is closed, but if things go badly, your whole balance can be lost at once.

The higher the leverage, the smaller the margin is compared with the position, and the less the price has to move before it runs out.