Crypto margin trading explained

What is margin in crypto trading?

Margin is collateral. In spot margin, the trader borrows an asset or quote currency and pays interest. In futures, margin backs a contract whose value changes with an index. Both create exposure larger than the cash committed, but their settlement and ongoing charges differ.

Feature	Spot margin	Perpetual futures
What is traded	Borrowed asset in spot market	Derivative contract
Recurring charge	Borrow interest	Funding when applicable
Asset ownership	Purchased asset can exist in balance	No ownership of underlying
Main forced-exit risk	Margin liquidation	Contract liquidation

Initial margin versus maintenance margin

Initial margin is required to open the trade. Maintenance margin is the minimum equity required to keep it open. When position equity falls below maintenance requirements, the exchange begins liquidation.

The maintenance rate often rises with position size. Two positions using the same leverage can therefore have different liquidation distances. Fees and unrealised losses also reduce equity.

How does isolated margin work?

Isolated mode assigns a defined amount of collateral to one position. If it fails, other available balance is normally not automatically consumed. Adding margin manually moves liquidation farther away but also increases the maximum loss.

Cross mode pools eligible equity across positions. Profits on one position can support losses on another, and a losing position can threaten more of the account. This is useful for deliberate portfolio hedges, but dangerous when a trader assumes the leverage number is the full risk boundary.

How does a margin call become liquidation?

1. Price moves against the position.
2. Unrealised loss reduces margin equity.
3. Equity approaches the maintenance requirement.
4. Risk controls may cancel open orders or issue warnings.
5. The liquidation engine reduces or closes the position.

The trigger usually uses mark price to resist manipulation. Read how liquidation price works before relying on the number shown beside last price.

What does a margin trade cost?

Trading fees apply to full notional on entry and exit. Spot borrowing accrues interest under the venue’s schedule. Perpetuals can exchange funding between longs and shorts. Liquidation can add further charges.

For a $5,000 position, a 0.05% entry costs $2.50. A matching exit makes $5 before spread, slippage, interest or funding. Compare the verified commission on our fees page and live periodic rates on funding.

A safer way to size margin positions

Choose a stop from the market structure, set a maximum dollar loss, and calculate position size. If maximum loss is $25 and entry-to-stop risk is 2.5%, notional is $1,000. At 5x that needs roughly $200 initial margin; at 10x roughly $100. The position risk remains $25 if the stop fills as planned.

Then ensure liquidation is farther away than the stop with room for volatility and slippage. If it is not, reduce leverage or notional. Never widen a stop merely to justify the exchange’s maximum leverage.