Margin

Margin is the collateral that backs a leveraged position. When you trade perps you never pay for the full position: you post a fraction of its value, and that fraction is what stands between normal price movement and liquidation. Understanding margin is understanding how much market movement your position can survive.

Spot trading involves no margin: you pay full price and own the asset. Margin is purely a leveraged-trading concept.

Initial vs maintenance margin

Two thresholds govern every position:

• Initial margin is what you must post to open the position. It’s the position’s notional divided by your leverage: opening $10,000 of exposure at 5x requires $2,000.
• Maintenance margin is the minimum that must remain as the position loses. It’s lower than the initial requirement, a buffer the venue insists on keeping intact. When unrealized losses push your equity in the position down to the maintenance threshold, liquidation triggers.

The gap between the two is your survivable range. Everything in margin management is about widening that gap: less leverage means more initial margin per unit of exposure, which means more room before maintenance is hit.

Isolated vs cross margin

Venues let you choose what stands behind a position:

Isolated margin walls off a fixed allocation. You assign, say, $1,000 to a position, and that $1,000 is the most the position can ever lose. If it’s liquidated, the rest of your account is untouched. The trade-off: the position is easier to liquidate, because only its allocation defends it.

Cross margin lets the entire account balance back every position. Positions are harder to liquidate, since your whole free balance absorbs drawdown, but when liquidation does come, it has your whole account to feed on. One bad position can take down everything sharing the pool.

Put plainly: isolated decides your maximum loss in advance; cross decides it at the worst moment. Isolated suits experiments and uncorrelated bets. Cross suits hedged books where positions offset each other and you actively manage the whole.

A worked example

You have $5,000 on a perp venue and open a $10,000 BTC long at $100,000 (0.1 BTC) at 10x, posting $1,000 as initial margin. Assume a 0.5% maintenance requirement ($50) for simplicity.

Isolated, $1,000 allocated: the position can absorb about $950 of loss before liquidation, roughly a 9.5% drop, near $90,500. If BTC gaps down 12%, you lose the $1,000. Your other $4,000 never noticed.

Cross: the full $5,000 backs the position, which can now absorb ~$4,950 of loss. Liquidation only comes near $50,500, a 49.5% drop. Far harder to liquidate. But if a violent move gets there (or you’ve opened other positions sharing the pool), the loss is $5,000, not $1,000.

Same trade, same leverage, same market. The margin mode changed only one thing: whether your worst case was capped at $1,000 or at everything.

How it connects

Margin, leverage, and liquidation are one mechanism seen from three angles: leverage decides how much margin backs each unit of exposure, and liquidation is what happens when the margin runs out. On perps, funding also drains or feeds your margin over time, even with price unchanged.

On Anello, margin mode and leverage are set per asset on the terminal. Grid and DCA bots trade Hyperliquid spot, where none of this machinery exists; see Risks of grid & perp trading for what does apply.