Margin & Leverage

Overview

Leverage amplifies trading power by allowing you to control larger positions with less capital. Frontier Chain supports up to 40x leverage on perpetual futures, with flexible margin management through isolated and cross-margin modes.

Key Concepts:

• Leverage: Multiply position size relative to margin

• Initial Margin: Collateral required to open a position

• Maintenance Margin: Minimum collateral to keep position open

• Isolated Margin: Position-specific risk isolation

• Cross Margin: Account-level margin sharing

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Leverage Basics

Leverage multiplies both potential gains and losses:

Example (10x Leverage):

Position: 1 BTC at $90,000 = $90,000 notional
Margin Required: $90,000 / 10 = $9,000
Price moves to $91,000 (+1.11%)
PnL: +$1,000 (+11.1% on margin)

Price moves to $89,000 (-1.11%)
PnL: -$1,000 (-11.1% on margin)

Maximum Leverage: 40x

• Minimum margin: 2.5% of position value

• Maximum capital efficiency

• Higher liquidation risk

Leverage Formula:

Leverage = Position Notional / Margin
Position Notional = Quantity × Entry Price
Required Margin = Position Notional / Leverage

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Margin Types

Isolated Margin

Each position has dedicated margin that doesn't affect other positions.

Characteristics:

• Risk Isolation: Liquidation only affects this position

• Fixed Margin: Margin allocated at position open

• No Spillover: Other positions remain safe

• Easy Risk Management: Clear per-position exposure

Use Cases:

• High-risk speculative positions

• Testing new strategies

• Limiting downside exposure

• Multiple uncorrelated positions

Example:

Account Balance: $100,000
Position 1: 1 BTC long, $10,000 isolated margin (10x)
Position 2: 10 ETH short, $5,000 isolated margin (7x)

If BTC liquidates:
- Lose $10,000 margin
- Remaining: $90,000 + ETH position
- ETH position unaffected

Advantages:

• Precise risk control per position

• No unexpected liquidations from other positions

• Clear profit/loss per trade

• Ideal for testing strategies

Disadvantages:

• Cannot use full account balance

• Each position needs dedicated margin

• Less capital efficient

• Higher overall liquidation risk

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Cross Margin

All positions share the account's entire available balance.

Characteristics:

• Shared Margin: Uses all available balance

• Auto Margin Addition: Prevents liquidation if funds available

• Higher Leverage Possible: More margin backing

• Account-Level Risk: One position can affect others

Use Cases:

• Professional trading

• Hedged positions

• Maximum leverage efficiency

• Correlated position strategies

Example:

Account Balance: $100,000
Position 1: 1 BTC long, $10,000 used
Position 2: 10 ETH short, $5,000 used
Free Margin: $85,000

If BTC drops and needs $3,000 more margin:
- Auto-pulled from free margin
- New free margin: $82,000
- Position avoids liquidation

Advantages:

• Maximum capital efficiency

• Automatic margin top-up

• Better for hedged strategies

• Lower liquidation risk with sufficient balance

Disadvantages:

• One bad position can affect entire account

• Less predictable risk per position

• Requires careful monitoring

• Account-wide liquidation possible

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Margin Requirements

Initial Margin

Required margin to open a position:

Formula:

Initial Margin = Position Notional / Leverage
Position Notional = Quantity × Entry Price

Examples by Leverage:

Leverage	Initial Margin	Example ($90,000 BTC)
5x	20% of notional	$18,000
10x	10% of notional	$9,000
20x	5% of notional	$4,500
40x	2.5% of notional	$2,250

Opening Position Requirements:

• Sufficient available balance (isolated) or free margin (cross)

• Margin locked when position opens

• Cannot be withdrawn while position open

• Must account for trading fees

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Maintenance Margin

Minimum margin to keep position open:

Formula:

Maintenance Margin = Initial Margin × 50%

Liquidation Trigger:

• Position liquidated when: Margin + Unrealized PnL < Maintenance Margin

• Emergency fund captures remaining maintenance margin

• Position closed at market price

Example:

Position: 1 BTC at $90,000 with 10x leverage
Initial Margin: $9,000
Maintenance Margin: $4,500

Liquidation Price (Long):
- $90,000 - ($9,000 - $4,500) = $85,500

Liquidation Price (Short):
- $90,000 + ($9,000 - $4,500) = $94,500

Margin Ratio Calculation:

Margin Ratio = (Margin + Unrealized PnL) / Initial Margin
Liquidation occurs at 50% margin ratio

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Liquidation Prices

Calculation

The price at which your position will be liquidated:

Long Position:

Liquidation Price = Entry Price - ((Initial Margin - Maintenance Margin) / Quantity)

Short Position:

Liquidation Price = Entry Price + ((Initial Margin - Maintenance Margin) / Quantity)

Example (Long Position):

Entry: $90,000 BTC
Quantity: 1 BTC
Leverage: 10x
Initial Margin: $9,000
Maintenance Margin: $4,500

Liquidation Price = $90,000 - (($9,000 - $4,500) / 1)
                  = $90,000 - $4,500
                  = $85,500

At $85,500: Position auto-liquidated

Example (Short Position):

Entry: $90,000 BTC
Quantity: 1 BTC
Leverage: 10x
Initial Margin: $9,000
Maintenance Margin: $4,500

Liquidation Price = $90,000 + (($9,000 - $4,500) / 1)
                  = $90,000 + $4,500
                  = $94,500

At $94,500: Position auto-liquidated

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Margin Management

Adding Margin (Isolated)

Increase margin to reduce liquidation risk:

Process:

1. Select position to add margin to

2. Specify amount to add

3. Margin transferred from available balance

4. Liquidation price moves further away

Effects:

• Reduces effective leverage

• Moves liquidation price

• Locks additional funds

• Improves position health

Example:

Original Position:
- Entry: $90,000
- Margin: $9,000
- Leverage: 10x
- Liquidation: $85,500

Add $3,000 Margin:
- New Margin: $12,000
- New Leverage: 7.5x
- New Liquidation: $84,000
- Safer position

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Adjusting Leverage (Isolated)

Modify leverage on open position:

Increase Leverage:

• Releases margin back to available balance

• Moves liquidation price closer

• Increases risk

• Requires sufficient maintenance margin

Decrease Leverage:

• Requires additional margin

• Moves liquidation price away

• Reduces risk

• Same effect as adding margin

Restrictions:

• Cannot exceed maximum 40x

• Must maintain minimum maintenance margin

• Only available for isolated margin

• Cross margin leverage is dynamic

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Leverage Selection Strategy

By Experience Level

Beginners (1-3x):

• Lower risk

• More time to react

• Smaller potential losses

• Learn market dynamics

Intermediate (3-10x):

• Moderate risk/reward

• Requires active monitoring

• Standard for many traders

• Balance of safety and efficiency

Advanced (10-20x):

• Higher risk

• Requires tight risk management

• Professional strategies

• Stop losses essential

Professional (20-40x):

• Maximum risk

• Institutional strategies

• Scalping and high-frequency

• Requires expert risk management

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By Market Conditions

Low Volatility:

• Higher leverage acceptable

• Tighter stop losses

• More predictable movements

• 15-30x possible for experts

Medium Volatility:

• Moderate leverage recommended

• Standard stop losses

• 5-15x typical range

• Most common market state

High Volatility:

• Lower leverage essential

• Wider stop losses

• 2-5x safer range

• Rapid liquidation risk

Extreme Volatility:

• Minimal leverage only

• Very wide stops or no leverage

• 1-2x maximum

• Position size reduction critical

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Margin Calls and Warnings

Position Health Monitoring

Track these metrics to avoid liquidation:

Margin Ratio:

Current Ratio = (Margin + Unrealized PnL) / Initial Margin
Healthy: > 75%
Warning: 50-75%
Critical: < 50%
Liquidated: Reaches 50%

Distance to Liquidation:

Price Distance = |Current Price - Liquidation Price|
Percentage = (Price Distance / Current Price) × 100%

Safe: > 10%
Caution: 5-10%
Danger: < 5%

Unrealized PnL:

PnL = (Current Price - Entry Price) × Quantity × Side
Side = +1 for long, -1 for short

Monitor continuously
Set alerts at key levels
Plan margin additions

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Advanced Margin Strategies

Portfolio Margin (Cross)

Use cross margin for correlated positions:

Hedged Positions:

Long BTC: 1 BTC at $90,000
Short BTC: 0.5 BTC at $90,500

Net Exposure: 0.5 BTC long
Margin Efficiency: High
Risk: Lower than separate positions

Spread Trading:

Long ETH/USDC perpetual
Short ETH/BTC perpetual

Profit from ETH/BTC ratio
Reduced directional risk
Efficient margin usage

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Risk-Adjusted Leverage

Calculate optimal leverage based on risk tolerance:

Formula:

Max Leverage = 1 / (Max Acceptable Loss %)

Example:
- Willing to lose 10% on liquidation
- Max Leverage = 1 / 0.10 = 10x

Example:
- Willing to lose 2.5% on liquidation
- Max Leverage = 1 / 0.025 = 40x

Practical Application:

• Account size: $100,000

• Risk per trade: 2% = $2,000

• If using 10x leverage on $10,000 position

• Liquidation loss: ~$5,000 (exceeds risk tolerance)

• Solution: Use lower leverage or smaller position

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Key Takeaways

Leverage Fundamentals:

• Amplifies both gains and losses proportionally

• Maximum 40x on Frontier Chain perpetuals

• Higher leverage = closer liquidation price

• Requires active risk management

Margin Mode Selection:

• Isolated: Better for speculative trades, clear risk

• Cross: Better for hedged strategies, capital efficiency

• Cannot mix modes on same account simultaneously

• Choose based on trading style and risk tolerance

Risk Management:

• Monitor margin ratio constantly

• Set alerts for liquidation warnings

• Add margin proactively in isolated mode

• Use stop losses to limit downside

• Never use maximum leverage without experience

Next Steps:

Funding RatesLiquidation SystemPosition Management