To have access to trading Perpetual Futures at CrossTower, you must also apply for and be eligible for access to Margin Trading.
Futures contracts allow traders to provide a set amount of equity or collateral in order to enter a position. The amount of collateral required will vary from platform to platform, currency to currency, and may also vary based on other aspects like the position size currently held or that is trying to be entered.
The amount of collateral is usually less than the overall notional amount of the position. This allows the trader to enter a larger position and potentially earn a larger gain (or loss) from that position. This is referred to as leverage.
In order to enter leveraged or margin-based positions, traders will need to provide an initial amount of collateral called initial margin. After entering the position, they will be required to hold a minimum amount of collateral, usually defined as a percentage of equity in the position. This is referred to as maintenance margin.
For example, 10x leverage allows you to put up 10% equity of the position’s current notional value to enter it. 10% is your initial margin requirement. After you’ve entered the position, your maintenance margin may be 7.5%, meaning if your equity value in the position falls below 7.5%, you will receive a margin call in which you will need to add additional collateral in order to keep the position open.
When you fail to “meet” your margin call and add additional collateral, your position is at risk to be liquidated by the platform.