What is margin? Initial, maintenance, and liquidations

Margin is the collateral behind every perpetual futures position. Understand initial vs. maintenance margin, margin vs. leverage, and how liquidations happen.

By Emily Hsia·Updated April 17, 2026

Margin is the collateral you post to open and maintain a leveraged position on a perpetual future. It's not a fee and it's not the full cost of the trade — it's the portion you put up yourself, while the venue extends the rest as leverage.

Because margin is what stands between your position and a forced close-out, the two numbers that matter most on any perp trade are how much margin you post at the start and how much you need to keep to stay open.

The short answer: what margin is

When you open a perp position, you don't pay the full notional size of the trade. You post a fraction of it as collateral. That collateral is your margin.

Open a $5,000 long perp with $1,000 of collateral and your margin is $1,000 and your leverage is 5x. Gains and losses are calculated against the full $5,000, but the only money actually at risk is the $1,000. That is why margin is both the most useful and the most dangerous thing about perps: it lets you express a larger view with less capital, but the entire position sits on top of it.

Initial margin vs. maintenance margin

There are two margin numbers that matter, and they do different jobs.

Initial margin is the collateral required to open a position. It's a percentage of the notional — for example, 20% at 5x leverage, 10% at 10x, 5% at 20x.
Maintenance margin is the minimum collateral required to keep the position open. It is lower than the initial margin, and it is the level that triggers liquidation if your equity falls below it.

A simple way to think about it: initial margin is the entry ticket, maintenance margin is the survival line.

Concept	What it means	Typical size	When it matters
Initial margin	Collateral required to open the position	5–50% of notional	At entry
Maintenance margin	Minimum equity required to keep the position open	~25–50% of initial margin	Every moment afterward

The gap between initial and maintenance margin is the buffer your position has before liquidation. That buffer shrinks as leverage rises.

Margin vs. leverage — what's the difference?

The two terms are easy to confuse because they describe the same trade from different angles.

Margin is the collateral you post — a dollar amount.
Leverage is the multiplier between your margin and the position's notional — a ratio.

They are two sides of the same number. A $1,000 position at 10x leverage is the same as $100 of margin on a $1,000 notional. Pick a leverage and you've picked a margin; pick a margin and notional and you've picked a leverage.

What matters for risk is how they combine. Higher leverage means less margin relative to the position, which means a smaller adverse move can wipe you out. At 2x leverage, it takes roughly a 50% move against you to liquidate. At 10x, it takes around 10%. At 50x, a 2% move will do it.

A worked example: how a perp gets liquidated

Here's a single example that ties margin, leverage, and liquidation together.

The setup:

Initial margin posted: $1,000
Leverage: 5x
Notional position size: $5,000 long
Entry price: $100 per contract
Maintenance margin: 1% of notional, or $50

Now walk through three scenarios.

Price rises to $110 (+10%). The position is up $500 (10% of the $5,000 notional), equity is $1,500 — a 50% return on margin. You can close and realize the gain.

Price falls to $90 (-10%). The position is down $500. Equity is $500, well above the $50 maintenance threshold. You can hold, add margin, or close.

Price falls to ~$82 (-19%). Losses have eaten almost all your margin. Once equity touches $50, the venue liquidates the position automatically at the prevailing market price, and the remaining margin is seized to cover the loss. You lose the full $1,000.

Two things to notice:

At 5x leverage, a ~20% adverse move was enough to wipe out the margin. At 10x, a ~10% move does it. At 20x, ~5%.
Liquidation is automatic and usually final. Even if the price rebounds a minute later, the position is gone.

FAQs

Is margin the same as leverage?

No — they are linked but not the same. Margin is the dollar amount of collateral you post. Leverage is the ratio between that margin and the total position size. Choosing one determines the other: $1,000 margin on a $10,000 position is 10x leverage; 10x leverage on a $10,000 position means $1,000 of margin.

Can I lose more than my margin on a perp?

On most major venues, no. The liquidation mechanism is designed to close the position before your account goes negative. But in fast markets or during price gaps, the actual fill price can be worse than the liquidation price, and some venues have historically socialized those shortfalls across other traders. Always read the specific venue's terms.

What happens if my equity hits maintenance margin?

When your equity falls to the maintenance margin threshold, the venue closes the position automatically — this is a liquidation. It happens without a manual margin call on most perp venues. You can usually avoid it by closing the position yourself, adding more margin, or reducing leverage before the threshold is breached.

The bottom line

Margin is the collateral that makes perpetual futures work. Initial margin gets you in; maintenance margin keeps you there; leverage is the ratio between them — and the higher it is, the smaller the adverse move needed to liquidate.

For how perps work end to end, see what are perpetual futures. For what you actually own when you trade a perp versus holding the underlying, see ownership vs. price exposure.

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This article is for general informational purposes only and is not financial advice. It is not a recommendation or offer to buy, sell, or invest in any security, asset, or product. Always do your own research and consult qualified professional advisors before making investment decisions.