Initial margin
Also called: IM · opening margin
Definition
Initial margin is the amount of collateral you must post to open a leveraged position, usually equal to the position value divided by your leverage.
How initial margin works
When you open a futures or margin position, the exchange sets aside part of your balance as initial margin. At 10x leverage the initial margin rate is 10% of the position value; at 20x it is 5%. That is why higher leverage needs less margin for the same position.
Initial margin is different from maintenance margin. Initial margin is what you need to open the position. Maintenance margin is the lower level you must keep to avoid liquidation. The gap between the two is your buffer against adverse price moves.
Exchanges often use risk tiers: the larger the position, the higher the initial margin rate, which lowers the maximum leverage available. Opening fees may also be reserved from your balance. With isolated margin, the initial margin is the most you can lose on that position; with cross margin, losses can draw on the rest of your balance.
Example
Suppose you open a 0.5 BTC long at 60,000 USDT, a position worth 30,000 USDT, using 15x leverage. The initial margin is 30,000 ÷ 15 = 2,000 USDT. If you chose 5x instead, the same position would need 6,000 USDT of initial margin, but it would also sit much further from its liquidation price because the buffer above maintenance margin is larger.
Common mistakes
- Thinking initial margin is the trade cost, when profit and loss are based on the full position value.
- Confusing initial margin with maintenance margin.
- Expecting maximum leverage on very large positions when risk tiers lower it.
Learn and practise
FAQ
How is initial margin calculated?
In simple terms, position value divided by leverage. Exchanges may adjust it with risk tiers and may also hold back the estimated opening fee.
Can I lose more than my initial margin?
In isolated mode, your loss on that position is normally limited to its margin. In cross mode, losses can use your other available balance.