Margin is the capital required to open and maintain a leveraged position. It acts as collateral, ensuring you can cover potential losses. On BitMEX, margin requirements include initial margin (to open a position) and maintenance margin (to keep it open). Traders can choose between cross margin and isolated margin to manage risk. Traders can opt for Single-Asset Margin or Multi-Asset Margining to define how their collateral is utilised across different currencies.
What Is Margin and Why Does It Matter?
Margin is the capital you need to open and maintain a leveraged position in derivatives trading. It acts as collateral, ensuring you can cover potential losses on your trades.
Every leveraged position on BitMEX requires margin. The amount depends on the size of your position and the leverage you select. Without sufficient margin, the exchange will not allow you to hold a leveraged trade.
Two key margin requirements govern every position:
- Initial margin is the minimum amount needed to open a position.
- Maintenance margin is the minimum amount needed to prevent liquidation.
When losses reduce your margin below the maintenance threshold, the exchange liquidates the position. Understanding these requirements is the foundation of effective risk management.
What Is the Purpose of Margin?
Margin serves two core functions in derivatives trading.
Leverage: Margin enables you to trade with leverage, amplifying both potential profits and losses. A small deposit controls a much larger position. For example, with 10x leverage on BitMEX, $1,000 in margin controls a $10,000 position.
Collateral: Margin is used to cover potential losses on your positions. If the market moves against you, the exchange draws from your margin to absorb losses. This protects both you and the exchange from negative balances.
These two functions make margin the mechanism that underpins all leveraged trading on BitMEX.
What Margin Types Are Available on BitMEX?
BitMEX offers two margin types under two categories. The type you choose determines how your collateral is allocated and how liquidation risk is managed.
Single Asset Margining provides two modes:
- Cross margin uses your entire account balance in a particular margin currency as collateral for all open positions with that settlement currency. Profitable positions can offset losing ones. This is the default setting on BitMEX.
- Isolated margin restricts margin to a specific position. Your maximum loss is limited to the margin assigned to that position.
Multi-Asset Margining allows users to utilise other currencies as collateral and operates in cross mode only.
Choosing the right margin type depends on your trading strategy and risk tolerance. Cross margin suits hedging and multi-position strategies. Isolated margin suits speculative trades with defined risk.