Understanding Margin
Margin is the capital you deposit as collateral to open a leveraged position. It serves as a buffer against potential losses and determines your maximum position size based on the leverage you choose.
There are two key margin concepts: 1. Initial Margin: The minimum amount required to open a position 2. Maintenance Margin: The minimum amount required to keep a position open
If your margin falls below the maintenance requirement due to losses, your position faces liquidation.
Margin can be managed in two modes: - Isolated Margin: Each position has its own margin; losses limited to that position - Cross Margin: All positions share margin; higher capital efficiency but shared risk
Example of isolated margin: - You deposit $500 margin for a position - If liquidated, you lose only that $500 - Other positions are unaffected
Example of cross margin: - You have $10,000 in your account - Losses in one position can draw from your entire balance - More margin available means more buffer against liquidation
For RWA perpetual trading, consider: - Which margin mode suits your strategy - How much margin gives adequate safety buffer - The cost of capital locked in margin - Correlation between multiple positions if using cross margin