Initial margin is what you need to open the position; maintenance margin is the minimum equity you must keep to hold it. Fall below maintenance and you get a margin call or an automatic liquidation, depending on the venue.
In isolated margin only the margin assigned to that position is at risk. In cross margin your whole balance backs every position, which moves liquidation further away - until it arrives and takes everything at once.
The mistake it causes: reading free margin as spare money. It is the buffer keeping your open trades alive.
Initial, maintenance and free margin
| Term | What it means |
|---|
| Initial margin | What you must post to open the position |
| Maintenance margin | The minimum equity you must keep to hold it |
| Free margin | Equity not currently backing a position |
| Margin level | Equity ÷ used margin, as a percentage |
The number that ends positions is the margin level. Most brokers issue a margin call around 100% and force-close at a stop-out level near 20-50%. Those thresholds are published in the account terms and are worth reading once, because they decide the order in which your positions die.
Free margin is not spare money
It is the buffer keeping your open trades alive. Treating it as available capital and opening more positions with it is how a manageable drawdown becomes a cascade: each new position consumes buffer, and when the margin level falls through the stop-out, the broker closes trades in whatever order its system chooses, usually at the worst possible moment.
Isolated versus cross
In crypto this choice is explicit and it matters enormously. Isolated margin risks only the collateral assigned to one position. Cross margin backs every position with your entire balance, which pushes liquidation further away and makes losing everything at once possible. Experienced desks use cross deliberately with hedged books. Anyone still learning should be isolated.
Margin is a deposit, not a cost
Unlike a fee, margin is returned when the position closes. What it costs you is opportunity: capital tied up, and a fixed distance between your entry and the point where the venue stops asking your opinion.
