Definition ∞ Trading on margin in cryptocurrency involves borrowing funds from an exchange or broker to increase the size of a trade beyond one’s own capital. This method, also known as leveraged trading, allows traders to control larger positions. While it can amplify potential profits, it equally magnifies potential losses, making it a high-risk strategy.
Context ∞ To engage in margin trading, an initial margin deposit is required as collateral. Traders must maintain a certain margin level to keep positions open, and a “margin call” is issued if this level falls too low, demanding additional funds. Failure to meet margin requirements can result in forced liquidation, where the exchange automatically closes the position to cover borrowed funds.
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