When trading futures, you'll frequently encounter the term "margin" — initial margin, maintenance margin — it can all seem confusing. But it's actually not hard to understand. Register on Binance and download the Binance APP so you can follow along and compare with the data shown in the APP.
The Basic Concept of Margin
Margin is the deposit you put up when opening a position — think of it as a "security deposit."
Since futures trading uses leverage, you don't need to put up the full amount — just a portion as margin. For example, to open a 1,000 USDT position with 10x leverage, you only need 100 USDT in margin.
Initial Margin
Initial margin is the minimum capital required to open a position.
Formula: Initial Margin = Position Value / Leverage
Example:
- You want to go long BTC with a 1,000 USDT position
- Using 20x leverage
- Initial Margin = 1,000 / 20 = 50 USDT
This means you only need 50 USDT to control a 1,000 USDT position.
Maintenance Margin
Maintenance margin is the minimum capital required to keep your position open. When your losses cause your account balance to fall below the maintenance margin, you'll be liquidated.
Maintenance margin is typically much lower than initial margin, generally between 0.4% to 5% of the position value, depending on position size.
Margin Ratio
Margin Ratio = Maintenance Margin / Account Equity
When the margin ratio reaches 100%, forced liquidation is triggered. You can monitor your margin ratio in real-time on the Binance APP's futures page — the lower it is, the safer you are.
Margin Differences Between Cross and Isolated Modes
Isolated Margin Mode
Each position's margin is independent. If a position is liquidated, you lose at most that position's margin — other positions and your account balance remain unaffected.
Cross Margin Mode
All positions share your entire futures account balance. The advantage is that you're less likely to be liquidated by small fluctuations. The disadvantage is that if liquidation occurs, you could lose all the money in your account.
Beginners are strongly recommended to use isolated margin mode.
Adding Margin
If your position is close to liquidation but you believe the price will recover, you can add margin to the position to lower the margin ratio and avoid forced liquidation.
In the APP, find your position details and tap "Add" or the plus button to do this.
Key Reminders
- Don't use all your funds to open positions: Keep some as a buffer so you're not immediately liquidated when the market fluctuates
- Watch margin ratio changes: Set alerts so you can act promptly when the ratio gets too high
- Higher leverage means less margin but more risk: Don't use high leverage just because the margin requirement is low
Understanding margin is essential for better managing your positions and risk.