Margin Trading Glossary

Essential terms every margin trader should understand. Click any term for a detailed explanation with examples.

A

Auto-Deleverage (ADL)

A mechanism where an exchange automatically reduces the positions of profitable traders when the insurance fund cannot cover liquidation losses.

B

Buying Power

The total value of positions you can open based on your available margin and leverage, representing your maximum trading capacity.

Basis (Futures Premium/Discount)

The difference between the futures contract price and the spot price of the underlying asset, representing the cost of carry or market sentiment.

C

Cross Margin

A margin mode where your entire account balance is used as collateral for all open positions, sharing margin across trades.

F

Funding Rate

A periodic payment exchanged between long and short traders on perpetual futures contracts to keep the contract price close to the spot price.

Futures Contract

A standardized agreement to buy or sell an asset at a predetermined price on a specific future date.

I

Isolated Margin

A margin mode where each position has its own dedicated collateral, limiting potential losses to only the margin assigned to that specific trade.

Initial Margin

The minimum amount of collateral required to open a new leveraged trading position.

Insurance Fund

A reserve fund maintained by a crypto exchange to cover losses when liquidated positions cannot be closed at the bankruptcy price.

L

Liquidation

The forced closure of a leveraged trading position by the exchange when the trader's margin falls below the maintenance requirement.

Leverage

A trading mechanism that allows you to control a larger position than your actual capital by borrowing funds, expressed as a ratio like 10x or 100x.

Long Position

A trading position that profits when the price of the asset increases. Going long means buying with the expectation that the price will rise.

M

Margin Call

A demand from a broker to deposit additional funds when your account equity falls below the required maintenance margin level.

Maintenance Margin

The minimum amount of equity you must maintain in your margin account to keep positions open and avoid liquidation.

Mark Price

A fair price calculation used by exchanges to prevent unfair liquidations, typically based on spot price index and funding rate.

Margin Requirement

The minimum amount of funds that must be deposited as collateral to open or maintain a leveraged trading position.

Maintenance Margin Ratio

The percentage of position value that must be maintained as equity to avoid liquidation, expressed as a ratio.

O

Open Interest

The total number of outstanding derivative contracts (futures or options) that have not been settled or closed.

P

Portfolio Margin

An advanced margin methodology that calculates requirements based on the overall risk of a portfolio rather than individual positions, offering greater capital efficiency.

Perpetual Contract

A type of futures contract with no expiration date that tracks the price of an underlying asset through a funding rate mechanism.

R

Realized PnL

The actual profit or loss that has been locked in by closing a trading position, as opposed to unrealized (paper) gains or losses.

S

Short Position

A trading position that profits when the price of the asset decreases. Going short means selling with the expectation that the price will fall.

Stop Loss

An order that automatically closes a position at a predetermined price to limit potential losses.

T

Take Profit

An order that automatically closes a position when a predetermined profit target is reached.

U

Unrealized PnL

The paper profit or loss on an open trading position that has not yet been realized through closing the trade.