Leverage measures exposure
Leverage is position notional divided by supporting equity or collateral, according to the venue’s margin model. A $1,000 position supported by $200 starts at 5× leverage. Your exposure is $1,000 even though the initial capital is smaller.
For a linear position, a 2% adverse price move produces roughly a $20 trading loss before costs. That is 10% of the initial $200. The same price move has a larger effect on collateral when leverage is higher.
Initial and maintenance margin
Initial margin is what you need to open a position. Maintenance margin is the minimum required to keep it open. If account equity falls below the applicable requirement, the venue can liquidate exposure.
The liquidation price is not simply “entry minus one divided by leverage.” Maintenance requirements, fees, funding, collateral valuation and other positions can change the calculation. Use the market’s displayed estimate and understand its assumptions.
Cross and isolated margin
In an isolated model, collateral is allocated to a particular position. In a cross model, eligible account equity can support multiple positions. The available models depend on the venue and product; do not assume every market offers both.
Cross margin can spread available collateral across positions, but losses in one can affect the others. Isolated margin makes the allocated collateral easier to identify, while additional collateral or configuration changes can still alter the position’s liquidation level.
Before and after entry
Check notional, collateral, estimated liquidation level, fees, funding and the exit instruction. Leave room for ordinary price movement rather than sizing solely around the maximum leverage shown in the interface.
After entry, track account equity and open orders as well as the chart. Adding a position or withdrawing collateral can change the margin picture. In TRUE, review the position details and use reduce-only when your intention is to reduce or close existing exposure.