Short answer: Maintenance margin is the minimum amount of equity you must keep in a perpetual futures position to avoid liquidation. If your margin drops below this level, the exchange automatically closes your position.
Think of it as the exchange’s safety net. When you trade with leverage, you’re borrowing funds, and the exchange needs to protect itself from losses. That’s where maintenance margin comes in. It’s a fixed percentage of your position’s notional value, and it determines how much downside your trade can absorb before being forcefully closed.
In practice, maintenance margin is what separates a healthy trade from a liquidated one. For example, on Binance Futures, a 10x leveraged BTC position might have a maintenance margin of 0.5%. That means if your position’s equity falls below 0.5% of its total size, you’re at risk of liquidation.
Key Takeaways
- Maintenance margin is a fixed percentage that varies by leverage and asset — always check it before opening a trade.
- Liquidation happens when your margin balance drops below the maintenance threshold, not when the price hits your entry.
- You can avoid liquidation by monitoring your margin ratio and adding funds or reducing position size.
How Does Maintenance Margin Differ From Initial Margin?
This is where a lot of beginners get tripped up. Initial margin is what you need to open a position — it’s the entry fee. Maintenance margin is what you need to keep the position open. They’re two different numbers.
Say you want to open a $10,000 ETH position with 10x leverage. Your initial margin is $1,000 (10% of the position). But the maintenance margin might be just 0.5%, or $50. That means you only need $50 in equity to stay in the trade — but you put in $1,000 to start. The exchange is giving you a buffer of $950 before liquidation hits.
Here’s a concrete example. If ETH drops 5%, your position loses $500. Your equity goes from $1,000 to $500. Since maintenance margin is $50, you’re still well above it. But if ETH drops 9.5% ($950 loss), your equity hits $50 — and liquidation triggers. So the actual liquidation price depends on your leverage and maintenance margin rate, not just the raw price move.
Sei Futures Strategy With OBV Confirmation explains how leverage amplifies both gains and losses, making maintenance margin even more critical.
What Happens During a Liquidation Event?
When your margin balance falls below the maintenance threshold, the exchange steps in. It’s not a warning — it’s an execution. The exchange automatically closes your position at the current market price, often with a penalty fee.
For perpetual futures, liquidation isn’t a single event. Exchanges use a “partial liquidation” or “full liquidation” model. On Bybit, for example, if you’re at 100% maintenance margin ratio, the system starts closing portions of your position. On Binance, it’s usually a full close once you cross the threshold.
Here’s the kicker: during volatile markets, your position might liquidate at a worse price than what triggered it. This is called “slippage,” and it can wipe out more than your initial margin. That’s why experienced traders keep a buffer — they never let their margin ratio get close to 100%.
- Cross margin: Your entire wallet balance backs the position, so liquidation is less frequent but can hit harder.
- Isolated margin: Only the allocated margin is at risk, limiting losses to that specific trade.
So which is better? It depends on your risk tolerance. Isolated margin lets you keep other funds safe, while cross margin gives you more breathing room.
How Can You Calculate Your Liquidation Price?
You don’t need to be a math whiz. Most exchanges show your liquidation price directly in the trading interface. But understanding the formula helps you manage risk better.
The basic formula for a long position is: Liquidation Price = Entry Price × (1 – (Initial Margin / Position Size) + (Maintenance Margin / Position Size)). For a short position, it’s similar but with a plus sign instead of minus.
Let’s run through an example. You open a long BTC position at $60,000 with 10x leverage. Your initial margin is $6,000 (10% of $60,000). The maintenance margin is 0.5%, or $300. Your liquidation price is approximately: $60,000 × (1 – 0.10 + 0.005) = $60,000 × 0.905 = $54,300. So if BTC drops to $54,300, you’re liquidated.
Here’s the thing: that’s a 9.5% drop. Without leverage, a 9.5% drop is just a loss. With 10x leverage, it’s a complete wipeout.
Most platforms also show a “margin ratio” — keep it above 200% to stay safe. Below 100% means liquidation is imminent.
Can You Add Margin After Opening a Position?
Yes, and this is one of the most important tools for avoiding liquidation. Most exchanges let you add margin to an existing position, which reduces your liquidation price. Think of it as topping up your account to give the trade more room to breathe.
On Binance Futures, you can click “Add Margin” on an open position. This increases your position margin, lowers your leverage, and moves your liquidation price further away. For example, if your BTC long is at $60,000 with 10x leverage and liquidation at $54,300, adding $1,000 in margin might move the liquidation down to $52,000 or lower.
But there’s a catch: adding margin doesn’t change the fact that the trade is losing money. It just delays the inevitable if the trend continues. Seasoned traders use this strategy sparingly, usually when they have a strong conviction that the price will reverse soon.
Another approach is to reduce your position size instead. Closing half your position cuts your exposure and effectively raises your liquidation price. It’s a more capital-efficient move than throwing more money at a losing trade.
Why Reversals Fail (And How to Fix That) covers position sizing strategies in more depth.
What Most People Get Wrong
First misconception: “Maintenance margin is the same for all exchanges.” It’s not. Binance, Bybit, Kraken, and others have different maintenance margin rates for the same asset. Always check the exchange’s fee schedule before trading.
Second misconception: “Liquidation only happens at your entry price minus the margin.” No, liquidation happens when your equity drops below maintenance margin, which is a moving target. Funding rates and realized PnL also affect your margin balance.
Third misconception: “You can’t lose more than your initial margin.” In theory, no. In practice, slippage during volatile markets can cause negative equity — meaning you owe the exchange money. This is called “auto-deleveraging” or “bankruptcy price,” and it’s a real risk.
Key Risks and Pitfalls
The biggest risk with maintenance margin is overconfidence. Traders see a low maintenance percentage (like 0.5%) and assume they have a huge cushion. But that 0.5% is relative to the full position size, not your margin. A 1% price move against a 100x leverage position wipes out 100% of your margin.
Another pitfall is ignoring funding rates. Perpetual futures have periodic funding payments between longs and shorts. If funding is negative and you’re long, you pay a fee every 8 hours. That fee comes out of your margin balance, slowly eating away at your buffer. Over a week, those payments can push you closer to liquidation.
Finally, don’t rely on stop-loss orders alone. During high volatility or low liquidity, your stop-loss might execute at a worse price than expected. This is called “slippage,” and it can trigger a liquidation before your stop-loss even fills. Always factor in a buffer of 10-20% above your maintenance margin level.
Our Take
From our research and analysis, we believe maintenance margin is the single most underappreciated concept in perpetual futures trading. Most beginners focus on entry prices and profit targets, ignoring the mechanics that keep their positions alive. That’s a recipe for disaster.
Our advice: treat maintenance margin like a fuel gauge. Check it before every trade, know your liquidation price, and never let your margin ratio drop below 200%. Use isolated margin for high-risk trades and cross margin for positions you’re willing to defend.
This content is for educational and informational purposes only and does not constitute financial advice. Perpetual futures trading carries substantial risk of loss, including the possibility of losing more than your initial deposit.
Sources & References
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