What is Margin?

What does Margin mean in practice?

Initial margin is what is needed to open the position, and maintenance margin is the minimum that must stay to keep it open. If losses push equity below that minimum, the position can be closed forcibly, which is called liquidation.

The practical consequence is that finite margin limits how many positions a strategy can hold at once. A strategy that looks fine with unlimited notional can turn out to be unrunnable once margin is finite, which is a reason to test with margin modelled.

A worked example

Illustrative only: 50,000 of equity with 5,000 initial margin per position allows at most ten positions at once, and fewer once some are losing and consuming maintenance margin.

How to read or test it

Before running a strategy, add up the margin its worst plausible simultaneous positions would need, and check you would still have headroom. Find out how your exchange defines maintenance margin and where the liquidation price would sit for a typical position. Consider that margin requirements can change in volatile markets. Testing on paper with margin modelled is the cheapest way to find out a strategy needs more capital than you have. Revisit these numbers whenever you change leverage or add a strategy.

How AKQX handles Margin

AKQX models broker-style margin in paper trading, so a position consumes margin as it would on a real account. Low capital or margin raises an alert.

See Paper trading platform for the feature page.

A common mistake

Ignoring maintenance margin and discovering it when a position is closed for you.

Related terms