Initial margin requirements

Initial margin requirements set the minimum share of a leveraged position a trader must fund with their own money before a broker or exchange will lend the rest. Expressed as a percentage of the total position size, it works as a first line of defense against default: a higher percentage means less borrowed money and less exposure for the lender if the market turns against the trade.

In traditional finance these thresholds are often fixed by regulators, such as the 50% minimum US rules set for stocks bought on margin, though brokers can demand more for volatile names. Crypto exchanges set their own rules instead, and because digital assets swing far more than blue-chip stocks, requirements differ from platform to platform and can tighten quickly in turbulent markets. Margin trading venues usually advertise a maximum leverage ratio, such as 3x, 5x, or 10x, rather than a raw percentage, but the two describe the same relationship: 5x leverage implies an initial margin of roughly 20% of the position's value.

The initial deposit is only the entry ticket, not a guarantee the position stays open. As losses eat into the account's equity, the balance can fall below the exchange's maintenance margin level, which triggers a margin call asking for more collateral, or an automatic liquidation if the trader does not respond in time. Because crypto prices can move by double digits within hours, many platforms keep initial margin requirements well above equity or futures market norms, and raise them further during sharp volatility to limit their own risk.