What margin trading is
Margin trading means using borrowed funds or assets to open a position larger than your capital. With $1,000 and 5x margin, you control a $5,000 position, and every 1% price move becomes 5% of your capital. It resembles perpetual futures on the surface, but the plumbing differs: margin trading borrows real assets and trades them on the spot market, while perps are cash-settled contracts. In practice, perps dominate crypto's leveraged volume, but margin remains the tool of choice for traders who want leveraged exposure with spot execution.
Isolated vs cross margin
| Mode | Collateral at stake | Consequence of liquidation |
|---|---|---|
| Isolated | Only the margin assigned to that position | You lose that margin; the rest of the account is untouched |
| Cross | Your entire account balance | One failing position can drain the whole balance |
Isolated margin makes the worst case explicit and capped, which is why it's the sensible default for a first leveraged position. Cross margin absorbs temporary swings better — and turns a single bad trade into a threat to everything else.
The number that matters: your liquidation price
Every leveraged position has a price at which the exchange force-closes it to recover the borrowed funds. Three things to internalize:
- Higher leverage pulls the liquidation price closer to entry — roughly −10% away at 10x, roughly −5% at 20x, before fees and maintenance margin tighten it further.
- Adding margin pushes the liquidation price away, but also puts more capital at risk in the same failing idea.
- Exchanges use different maintenance-margin formulas, so the same leverage produces slightly different liquidation prices on different venues.
Check the liquidation price before confirming any order, and make sure your stop-loss sits well above it — a stop that only triggers near liquidation isn't protection, it's decoration. What liquidations do to the broader market is covered in the liquidation data guide.
The costs that quietly eat returns
- Borrow interest. Borrowed funds accrue interest continuously, at rates that vary by asset and market conditions. Over a long hold, interest can rival the price move you were trading for.
- Trading fees on both the entry and exit legs.
- Liquidation penalties. Depending on the venue, force-closures may involve additional fees on top of the loss.
- Slippage on market orders, especially at size or in fast conditions.
Stack these up and short-horizon margin trades can cost more than the equivalent perp position — worth comparing before choosing the instrument.
The workflow
- Complete KYC on an exchange that offers margin, and enable the margin (or unified) account.
- Transfer collateral — usually USDT or a major coin — into it.
- Choose leverage and isolated/cross mode.
- Before confirming the order, check the liquidation price and place a stop-loss well above it.
- Closing the position normally settles the borrowed amount and any accrued interest.
Staying out of trouble
- Liquidation isn't a normal loss — it's losing essentially the entire margin. Every rule of thumb about stops applies double under leverage.
- Exchange outages and system delays tend to coincide with exactly the volatility that threatens leveraged positions; don't assume a stop order is a guarantee.
- The 1% risk rule still applies: cap what a single trade can cost the account, and the leverage number becomes much less dangerous.
- Start at 1–3x. The goal of the first months isn't return — it's learning how far crypto moves in a day while your mistakes are still cheap.