What is margin?

The collateral you post to open and maintain a leveraged position.

Margin is the deposit that lets you control a position larger than your cash. It appears on any exchange screen offering leverage, on lending products where borrowed funds buy more of an asset, and across derivatives markets. Two figures govern it: the initial margin needed to open, and the maintenance margin needed to stay open.

The costly misunderstanding is treating margin as the maximum you can lose. It is the amount at risk of being seized, and it can be exhausted by a move far smaller than the one that would have troubled a spot position. Margin trading is also a separate product from spot trading, and many exchanges offer it only in some jurisdictions.

How it works

1. You post collateral, either cash or an accepted asset with a haircut applied to its value.
2. The exchange lets you open a position up to a multiple of that collateral. The multiple is the leverage.
3. Profit and loss are marked against a reference price continuously, not at close. Unrealized loss reduces your usable margin in real time.
4. When equity falls to the maintenance margin, the position is force-closed by the risk engine. On most venues this happens automatically, with no call and no grace period.

Collateral is held in one of two modes. Isolated margin ring-fences a set amount to one position, so a loss cannot reach the rest of the account. Cross margin pools the whole balance behind every position, which delays liquidation but puts everything at stake. Borrowed funds also accrue interest or a funding payment, so a position held for weeks costs money even if the price does not move.

Example

Illustrative figures. You post $1,000 as initial margin at 5x leverage, controlling a $5,000 position. The venue's maintenance margin is 0.5% of notional, or $25.

A 10% fall in the asset costs $500 on the $5,000 position. Your equity drops to $500 and the position survives. A 19% fall costs $950, leaving $50 of equity, which is close enough to the $25 maintenance level that any further move triggers liquidation. The same 19% fall on a $1,000 unleveraged spot buy would have cost $190 and forced nothing.

Why it matters when you buy

Most people buying crypto do not need margin, and an exchange offering it prominently is not a reason to use it. What matters for a buyer is knowing whether your account is on a spot or margin product, because the two settle, tax, and liquidate differently. Availability is jurisdictional: check the venue profile at the exchange directory and the rules summarized for your region at the tax and jurisdiction pages before assuming a leveraged product is open to you.

Related terms

• leverage — the multiple margin makes possible
• maintenance margin — the level that triggers force-closing
• initial margin — what you must post to open
• liquidation — what happens when margin runs out
• isolated margin — ring-fencing collateral to one position
• cross margin — pooling collateral across all positions

Questions

Is a margin call the same as liquidation?

No. A margin call is a request for more collateral. Most crypto venues skip it entirely and liquidate automatically when equity hits the maintenance level, so there is often no warning step at all.

Can I lose more than I deposited?

On venues without negative balance protection, yes, if the market gaps through your liquidation price. Check the account agreement, because this is a contractual term rather than a property of the market.

Does holding a margin position cost anything if the price is flat?

Usually. Borrowed funds accrue interest, and perpetual positions pay or receive funding at set intervals. A flat market can still drain a position slowly.