Futures and Perpetuals · Crypto Trading Guide

Leverage changes the relationship between collateral and exposure. Liquidation depends on maintenance rules, equity and the price reference used by the venue.

Distinguish notional and equity

A hypothetical $10,000 position supported by $2,000 equity begins at five times notional leverage. A 3% adverse price move on a linear position produces roughly a $300 loss, or 15% of the initial equity, before costs. Leverage amplifies the effect on equity without improving the quality of the underlying trade.

Separate initial and maintenance margin

Initial margin is required to establish exposure. Maintenance margin is the minimum requirement for keeping it open under the venue’s rules. Liquidation can begin before equity reaches zero. Fees, funding, other positions, collateral discounts and tiered requirements can alter the threshold. Dividing one by leverage is not a reliable liquidation calculator.

Understand the reference price

Many venues use a mark price for risk calculations rather than the last traded price. An index can combine external prices, while a mark may apply additional adjustments. Read the specification and trigger settings. A chart showing last trades may never display the exact reference that triggered liquidation. A stop configured on another reference can behave differently from the margin engine.

Compare margin arrangements

Isolated margin generally allocates collateral to a position, while cross margin shares eligible account equity across positions. The exact scope varies. Cross margin can delay one liquidation by exposing a broader balance, so it is not automatically safer. In a simplified model with $2,000 equity and a fixed $500 maintenance requirement, only $1,500 separates the account from that threshold before costs. Real requirements can change as position value changes. Use the venue’s calculations and stress test adverse execution instead of treating a displayed estimate as a guaranteed boundary.

Try it yourself

A $12,000 linear position with $3,000 initial equity loses 5% of notional. What remains before fees and funding?

Show the worked answer

The loss is $600 and equity becomes $2,400. Whether liquidation occurs depends on the applicable maintenance requirement and account rules.

Further reading

Educational material. Examples and rates are hypothetical, not trade recommendations. Product terms, eligibility and risks vary by venue and jurisdiction.

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