Maintenance margins are typically lower than initial margins, however the exact amount can vary as it is set by the exchange. And if your goal is to avoid liquidation, you will want to keep an eye on the value of your account, which can fluctuate with movements in the prices of the futures contracts that you hold, and ensure that it stays above the maintenance margin. If the initial margin is the amount of funds you need to open a position, the maintenance margin is the amount of funds you need for your position(s) to remain open. It is also important to remember when opening a futures position that you do not own the underlying asset, and the margin you provide is not a down payment.

Crypto Trading Course

Now let’s say the price of Bitcoin drops from $25,000 to $23,000. With your 10 Nano contracts, the $2,000 decrease in Bitcoin’s price would equate to a $200 decrease in the Open Trade Equity (OTE) of your long position, reducing your initial $825 to $625. This is below the maintenance margin, which means your position would be partially liquidated, with two of your contracts being automatically closed out. Why were two contracts closed out?

In the United States, spot trading of cryptocurrencies using leverage is prohibited for most investors. However, there are other ways for traders to get exposure to crypto while trading with leverage, with the most popular way being trading crypto derivatives, such as futures and options. Depending on the products your Futures Commission Merchant (FCM) supports, you may have the ability to buy or sell futures and options contracts for cryptocurrencies like Bitcoin or Ethereum with leverage. Options contracts give you the right to buy. Futures contracts are agreements to buy or sell an asset at a set price on a future date. Sell an asset without being locked into the decision upfront.

The Definitive Information To Learn Crypto Trading

While trading with leverage can provide increased buying power and enhanced returns, it is also important to keep in mind that it also magnifies the potential losses and increases the risk of your position. Disclaimer: Trading in futures involves substantial risks. Futures products and services on Coinbase Advanced are offered by Coinbase Financial Markets, a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. Educate yourself on the market and the terms and conditions associated with any offered leverage before making a trade. Leverage in futures trading can work for you or against you. You should only trade in financial products that you are familiar with and understand the associated risks, and after carefully considering whether such trading is suitable in light of your investment experience, financial position, and investment objectives. The risk of loss using leverage can exceed your initial investment amount.

Divide the $625 that remains by the initial margin (33%) to get the market value after liquidation, which is equal to $1,894. Because of the risks outlined above, trading with leverage is not for everyone. You will want to keep an eye on your account balance to ensure it does not fall below the maintenance margin, otherwise liquidation can occur. In fact, many countries have rules and regulations that brokers, exchanges, and other financial services firms must adhere to that dictate who can trade with leverage, and what types of assets are eligible for this type of trading.