Margin trading

In margin trading the trader puts up part of the position's value, the margin, and the platform lends the rest. With 5x leverage, for example, a deposit of 1,000 dollars controls a 5,000-dollar position. The borrowed funds accrue interest, and the account must keep a minimum maintenance margin or the position is closed.

Crypto exchanges offer spot margin, where borrowed funds are used to actually buy or sell coins, and derivatives such as perpetual futures, where the margin backs a contract. Accounts can use isolated margin, which limits the risk to one position, or cross margin, which shares the whole balance among positions. Margin calls and liquidations follow automatically when losses eat into the deposit.

Because losses are amplified, a small move against the trade can wipe out the margin. Interest, funding and fees add up on positions held for a long time, and several jurisdictions restrict leveraged crypto trading for retail clients.