What is Maintenance Margin?
Maintenance margin is the minimum amount of collateral that must be maintained in a trading account to keep leveraged positions open. If your account equity falls below this level due to trading losses, you face margin calls and potential liquidation. It represents the last line of defense before your position is forcibly closed.
The concept distinguishes between the initial margin required to open a position and the maintenance margin needed to sustain it. Initial margin is typically higher, providing a buffer. As your position incurs losses, your equity decreases toward the maintenance margin level. Understanding this distinction helps traders manage their risk exposure effectively.
How it Works
Maintenance margin is typically expressed as a percentage of position value. If a platform requires 5% maintenance margin and you hold a $10,000 position, you must maintain at least $500 in equity. When your equity (collateral plus unrealized P&L) drops below this level, your position becomes eligible for liquidation.
The calculation is straightforward: Maintenance Margin = Position Value × Maintenance Margin Rate. Your available margin is your equity minus the maintenance margin requirement. When available margin reaches zero, you are at the liquidation threshold.
Different platforms and position types have varying maintenance margin requirements. Highly liquid assets like BTC and ETH might require 2-5% maintenance margin, while less liquid assets might require 10% or more. Some platforms also use tiered margin requirements where larger positions require higher maintenance percentages.
In DeFi perpetual platforms, maintenance margin functions similarly. GMX, dYdX, and Hyperliquid each set their own maintenance requirements that determine when positions can be liquidated. These parameters are typically set through governance and adjusted based on market conditions.
Practical Example
On a perpetual futures platform with 1% maintenance margin, you open a $50,000 long position with $5,000 collateral (10x leverage). Your maintenance margin requirement is $500 (1% of $50,000). If the trade moves against you and your collateral drops below $500 in value, you are liquidated.
This means you can sustain up to $4,500 in losses (90% of your collateral) before liquidation. With a $50,000 position, that is a 9% adverse price move. Understanding this math before entering helps you evaluate whether the risk-reward makes sense.
Why it Matters
Maintenance margin determines the precise boundary between keeping and losing your position. Traders who understand maintenance margin can calculate their exact liquidation prices before entering trades, enabling informed position sizing. Those who ignore it often face unexpected liquidations during volatile markets.
The ratio between your current equity and maintenance margin reveals your position's health. A comfortable buffer (3x or more maintenance margin) provides safety against normal volatility. Operating near maintenance margin levels means even small adverse moves threaten your position.
Maintenance margin also affects capital efficiency. Lower maintenance requirements allow higher leverage and more efficient capital use, but with correspondingly higher liquidation risk. The trade-off between capital efficiency and safety is a personal risk management decision that maintenance margin makes explicit.
Fensory calculates your effective maintenance margin requirements across DeFi positions, showing exactly how much buffer you have before liquidation and helping you maintain appropriate safety margins.