Opening a position requires initial margin, which your leverage sets. Keeping it open requires only maintenance margin, a smaller percentage of the notional value that the exchange sets per contract. Larger positions move into higher tiers with higher maintenance rates, because they are harder to close without moving the market. When the position's equity drops to the maintenance level, liquidation starts.
Example
A $100,000 BTC position with a 0.5% maintenance rate needs at least $500 of equity to stay open. Opened at 20×, the initial margin is $5,000, so the position can lose about $4,500 before it reaches the maintenance level. If the same position fell into a tier with a 1% rate, it would need $1,000 and would be liquidated about $500 of losses sooner.
Why it matters
Maintenance margin is the reason liquidation happens before your margin reaches zero. It also explains why large positions are liquidated earlier than a simple 1/leverage calculation suggests, and why exchanges lower the maximum leverage as position size grows.
Common mistake
Estimating liquidation as entry × (1 − 1/leverage) and stopping there. That ignores the maintenance rate and fees, so the real liquidation price is closer than you think, sometimes close enough to catch a stop placed right next to it.
Put it into practice
FAQ
- What is the difference between initial and maintenance margin?
- Initial margin is what you need to open the position (notional ÷ leverage). Maintenance margin is the smaller amount you must keep to avoid liquidation.
- Why does my exchange have margin tiers?
- Bigger positions are harder to close in a liquidation without moving the price, so exchanges ask for a higher maintenance rate and allow less leverage as the notional value grows.
- Do I get a margin call before liquidation?
- Some exchanges send a warning as your margin ratio approaches the limit, but crypto exchanges liquidate automatically. Do not count on having time to add margin.