Technical Definition

Margin

Margin is capital deposited or maintained to support a leveraged trading position.

By Crypto University Editorial
LeverageLiquidationLong / Short

✦ Key Insight

Falling below required margin levels can trigger a margin call, position reduction, or liquidation.

✕ Common Misconceptions

Futures margin is not the same as buying an asset with a traditional loan or down payment.

Detailed Explanation

Margin acts as financial backing for a position. Initial margin is generally required to open a position, while maintenance margin is the minimum equity required to keep it open.

In Practice

“A trader posts $2,000 of margin to support a futures position with a larger notional value.”

Dig Deeper

Funding rate

A funding rate determines periodic payments between long and short perpetual-futures traders to help keep the contract price near the spot price.

Liquidation

Liquidation is the forced reduction or closure of a leveraged or collateralized position when required risk or collateral thresholds are breached.

Leverage

Leverage allows a trader to control a position larger than the capital committed to support it.

Long / Short

A long position generally benefits when an asset rises in price, while a short position generally benefits when it falls.