Crypto glossary

Initial Margin

Initial margin is the collateral you must post to open a futures or other leveraged position. Its size relative to the position sets your leverage: the less initial margin you post, the higher the leverage and the closer your liquidation point.

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How it is calculated

Initial margin is usually expressed as a percentage of the position's value. If a platform requires 10 percent, you need 1,000 USDC to open a 10,000 USDC position, which is 10x leverage. Many crypto platforms let you choose the leverage, and the initial margin follows from that choice: 1 divided by the leverage.

Platforms often raise initial margin requirements for very large positions, volatile assets or during turbulent markets, because bigger and riskier positions are harder to liquidate cleanly.

Initial versus maintenance margin

Initial margin is the entry ticket. Maintenance margin is the lower amount you must keep afterwards. The space between the two is your buffer: price can move against you until losses eat through that buffer, at which point the position is liquidated.

Because maintenance margin is lower, posting only the minimum initial margin does not mean instant liquidation, but it means the buffer is as thin as the platform allows.

An example

Say you want a 20,000 USDC long position on ETH. At 20x leverage the initial margin is 1,000 USDC. If maintenance margin is 0.5 percent, or 100 USDC, you can lose about 900 USDC before liquidation, which is a price move of roughly 4.5 percent against you. At 5x leverage the same position needs 4,000 USDC, and the price can move close to 20 percent before you are liquidated.

Why it matters for risk

Using exactly the minimum initial margin maximizes leverage, which maximizes both gains and the chance of liquidation. Many experienced traders deliberately post more than the minimum, or size positions smaller, so normal price swings do not close them. Fees, funding payments and slippage also come out of the margin, so the real buffer is a little smaller than the simple calculation suggests.

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Frequently asked questions

Do I get the initial margin back?

Yes, whatever remains after profits or losses, fees and funding is returned when you close the position, unless it has been liquidated.

Why do platforms change initial margin requirements?

To manage their own risk. Larger positions and more volatile markets are harder to liquidate cleanly, so platforms may require more collateral.

Is initial margin the same as my maximum loss?

With isolated margin it is usually the most you can lose on that position. With cross margin, losses can draw on your wider account balance.

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All glossary terms · Educational reference only — not investment, legal, tax or financial advice.