Leverage and margin explained

The numbers

Initial margin = position value divided by leverage. A 1,000 USDT position at 10x needs 100 USDT.

HedgerX gives a rule of thumb: at 10x, a 10% move against you liquidates the position, and at 100x a 1% move does. The real liquidation price also depends on the maintenance margin rate, which rises with position size, and on fees and funding.

Isolated and cross margin

Isolated margin assigns a fixed amount to one position. If that position is liquidated, you lose that margin and the rest of your balance stays untouched. Cross margin puts your whole available balance in that currency behind your positions to avoid liquidation. It absorbs small moves better, but if the price keeps falling it can cost you the entire balance. HedgerX’s examples are in cross vs isolated margin.

What raises the risk

• Higher leverage brings the liquidation price closer.
• Larger positions move into tiers with a higher maintenance rate.
• Funding fees you pay wear down your margin over time.
• In fast markets a stop-loss can fill at a different price.

What lowers it

Lower leverage, isolated margin, a stop-loss placed well away from the liquidation price, and a position you can afford to lose entirely all help. This page is not financial advice.