# Margin ## Margin in Trading Margin is the amount of money you deposit to your account as collateral to open and maintain a leveraged position. It's essentially your trade collateral that the exchange temporarily locks. Margin trading allows opening positions larger than your account balance. For example, with 5× leverage, you can buy $5,000 worth of cryptocurrency with only $1,000. ### Types of Margin **Initial margin** is the minimum amount required to open a position. Calculated as a percentage of the full trade value. For example, with 10× leverage, initial margin is 10%. To buy $10,000 worth of BTC, you need to deposit $1,000. **Maintenance margin** is the minimum level of funds required to keep positions open. Usually lower than initial margin. If your balance drops below maintenance margin due to losses, the exchange can forcibly close your positions. **Free margin** refers to funds not locked in positions. You can use them for new trades or withdrawal. ### How Margin Works #### Example of Opening a Position **Initial conditions:** * Account balance: $2,000 * BTC price: $50,000 * You want to buy: 0.2 BTC ($10,000) * Leverage: 5× **What happens:** 1. Exchange locks $2,000 as margin (20% of $10,000) 2. Exchange provides $8,000 as credit 3. You buy 0.2 BTC for the full amount of $10,000 4. Free margin = $0 (all funds are locked) #### Scenario 1: BTC Price Rises 10% **New BTC price:** $55,000 * Position value: 0.2 BTC × $55,000 = $11,000 * Your profit: +$1,000 * Account balance: $3,000 * Locked margin: $2,000 * Free margin: $1,000 * **Margin level: 150%** ✅ You can open a new position with $1,000 or withdraw the profit. #### Scenario 2: BTC Price Falls 10% **New BTC price:** $45,000 * Position value: 0.2 BTC × $45,000 = $9,000 * Your loss: −$1,000 * Account balance: $1,000 * Locked margin: $2,000 (required) * Free margin: −$1,000 ⚠️ * **Margin level: 50%** ❌ Balance is below required margin — margin call possible. ### Margin Level Margin level shows how safe your position is: **Margin level = (Account balance / Locked margin) × 100%** **Above 200%** — safe zone. Sufficient funds reserve. **100–200%** — risk zone. Margin is sufficient, but reserve is small. **Below 100%** — critical zone. Margin call possible. #### Calculation Example You have an open ETH position: * Account balance: $3,000 * Locked margin: $1,500 Margin level = (3,000 / 1,500) × 100% = **200%** This is a safe level. The price can drop 50% (loss of $750), and the margin level will remain above 100%. ### Margin Call A margin call occurs when the margin level drops below the minimum acceptable level (usually 100–120%). **What happens:** 1. Exchange sends a notification about the need to fund the account 2. You can deposit additional funds 3. Or close part of your positions to free up margin If no action is taken, the exchange will **forcibly close** positions. This is called **stop-out** or **liquidation**. #### Margin Call Example **Situation:** * Account balance: $1,200 * Locked margin: $1,000 * Margin level: 120% **Price moves against you:** * Loss: −$400 * New balance: $800 * Margin level: 80% ⚠️ **Result:** The exchange automatically closes the position because the level dropped below critical. You lose $400, and the remaining $800 is returned to your account. ### Two Types of Margin Trading #### Isolated Margin Risk is limited only to the funds allocated for a specific position. If the position is liquidated, you will lose only those funds. **Example:** You allocate $500 for a BTC position with 10× leverage. Even if you have $5,000 in your account, you will only lose $500 upon liquidation. #### Cross Margin All funds in the account are used as collateral for all positions. This reduces the risk of liquidation, but in case of failure, you can lose your entire balance. **Example:** You have $5,000 in your account and three open positions. If one is losing, the remaining funds help avoid liquidation. ### ⚠️ Risks of Margin Trading **Amplified losses** 10× leverage amplifies not only profits but also losses by 10 times. A 10% price drop will result in a 100% loss of your deposit. **Forced closure** The exchange can close positions at the worst possible moment when the margin level is critically low. **Leverage fees** Exchanges charge for using borrowed funds. The longer you hold a position, the more you pay. **Emotional pressure** Leveraged trading creates stress due to high risks. This can lead to impulsive decisions. ### 💡 Recommendations * Use no more than 20–30% of available margin for one position * Monitor margin level — don't let it drop below 150% * Always set stop-loss to limit losses * Beginners should trade without leverage or with minimal 2× leverage * For first trades, use isolated margin * Calculate maximum loss before margin call before opening a position * Remember: the higher the leverage, the higher the risk of losing all capital --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://guide.moontrader.com/en-moontrader-docs/market-concepts/margin.md?ask= ``` The question should be specific, self-contained, and written in natural language. 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