What Is Margin Trading in Crypto?

Margin trading is borrowing money from an exchange to trade with more than you actually have. The cash you put up is the margin, and it works as collateral for the loan: the exchange lends against it, charges interest for as long as the position stays open, and watches your collateral constantly. If it starts running out, the exchange closes your trade to protect the money it lent. You keep the profits and you carry all of the losses.

A mortgage is the closest everyday version — your deposit, the lender's money, the house as security — except this lender can sell the house the moment its value dips, at three in the morning, without asking you first.

What is a margin call, and what is liquidation?

Every margin position has a floor called the maintenance margin: the minimum collateral the exchange will tolerate. As losses eat into your margin and you approach that floor, you get a margin call, which is simply a demand for more collateral. If you do not top it up, the position is liquidated — closed automatically at whatever price is available — and the margin you put in is gone, minus a liquidation fee on top. In crypto this happens in seconds and often with no warning worth the name.

What is the difference between isolated and cross margin?

Isolated margin ring-fences one position: only the collateral you assigned to that trade can be lost. Cross margin puts your whole account balance behind every open position, which keeps trades alive longer through a dip, and means one badly timed trade can take everything else with it. Beginners who lose an entire account usually do it on cross margin without realising that is what they chose.

What quietly drains a margin position?

Costs that do not show up in the price. Interest accrues on the borrowed part every hour or every day, so a position held for weeks pays rent the whole time. There are fees to open and to close. And a brief spike down can touch your liquidation level and end the trade minutes before the market recovers — you were right about the direction and still lost the money.

If you go near it, work out your liquidation price before you enter rather than after, use isolated margin and the smallest multiple offered, and never send fresh money to rescue a losing position. Our guides to leverage and stop-loss orders explain the two things that decide whether this ends badly.