Foundations · Lesson 5 · Beginner

Margin: your posted equity

You understand initial and maintenance margin as well as the difference between isolated and cross.

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What margin is

Margin is the equity you post for a position. Initial margin opens the position, maintenance margin is the minimum needed to keep it open.

Isolated vs cross

Isolated is liable only with the assigned margin, so your maximum loss is known in advance. Cross is liable with the whole account and risks everything at once on a strong move.

Move the leverage and see how the same margin controls a larger position.

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Test yourself

In which mode can a single trade hit your entire account?

Isolated
Cross

The key points at a glance

Margin is the equity you post for a position.
Isolated is liable only with the assigned margin, cross with the whole account.

Deep dive

Initial and maintenance margin: two thresholds

Margin is your equity posted as collateral for a leveraged position. You need the initial margin to open, roughly position size divided by leverage. The maintenance margin is the minimum that keeps the position open.

A 10,000 USDT position at 10x ties up around 1,000 USDT of initial margin.
Distance to liquidation is about 1 divided by leverage.
10x: around 10 percent, 25x: around 4 percent, 50x: around 2 percent.

Isolated vs cross: which mode protects you?

Isolated margin is liable only for the margin assigned to a single position, so your worst case is hard and known in advance. Cross margin uses your whole account equity as a buffer and delays liquidation, but risks everything at once on a strong move.

Isolated: a total loss wipes out at most this one margin.
Cross: a tail event hits the entire account.
For beginners, isolated is the clear recommendation.

Never meet a margin call

The hardest rule: do not service a margin call by adding funds, close the position instead. Goodman's 12,000-pound day shows how he overrode the stop, added to the position and topped up by debit card until the account was wiped out.

Adding funds turns a limited loss into an unlimited one.
Averaging down lowers the entry but makes the position uncontrollable.
Always keep the loss side limited and known.

Estimating the liquidation price

You don't need to calculate the liquidation price to the cent, but you should have it roughly in your head. Approximation for a long in isolated mode: entry times (1 minus 1 divided by leverage plus maintenance margin rate). Long at 100, 10x, rate 0.5 percent gives around 90.5.

10x: around 9.5 percent against you wipes out the stake.
25x: around 4 percent, 50x: around 2 percent.
Always place the stop well before the liquidation price, behind a valid level.

Sources: Elder, Goodman

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