Two thresholds, two jobs
| Term | Job | What changes it |
|---|---|---|
| Initial margin (IM) | Collateral required to open or increase a position | Position value, leverage, orders, account mode, and fee reserve |
| Maintenance margin (MM) | Minimum collateral required to keep the position/account open | Position value, mark price, risk tier, portfolio/account offsets, and exchange rules |
A common linear-contract teaching formula is IM = position value ÷ leverage. A common maintenance form is MM = position value × maintenance rate − tier deduction. Those are useful models, not universal liquidation formulas. Exchanges can add closing-fee reserves, collateral haircuts, order loss, portfolio offsets, and different inverse-contract conventions.
Calculate position value in the contract’s own convention
| Contract type | Position-value convention in Bybit’s current guide | Common mistake |
|---|---|---|
| USDT/USDC linear | Position size × mark price | Using entry price after mark price has moved |
| Inverse | Position size ÷ mark price | Applying the linear multiplication formula |
Bybit also states that the IM and MM shown in the position tab include an estimated taker fee to close. Therefore a hand calculation that omits the fee can be mathematically tidy and still disagree with the live requirement. Copy the displayed components before troubleshooting the difference.
Worked example
A $20,000 position at 10× leverage has a simplified initial margin of $2,000. Suppose the applicable maintenance requirement is $120 after the exchange’s tier calculation. The theoretical loss buffer is not the full $2,000: closing fees, funding, and the venue’s liquidation process also consume equity. As mark price changes, position value and the maintenance tier can move.
Increasing leverage to 20× reduces simplified IM to $1,000 while the economic position is still $20,000. The price risk did not halve; the collateral buffer narrowed.
Isolated, cross, and portfolio margin change the denominator
In isolated mode, compare the position’s assigned equity with its maintenance requirement. In cross mode, eligible account equity, other positions, open orders, and funding can change the available buffer. Portfolio margin can add offsets and scenario-based risk. Reusing the isolated calculation for those accounts produces a precise-looking but wrong liquidation estimate.
Why risk tiers matter
Maintenance rates often rise with position size. A larger position can cross into a new risk tier, raising the required maintenance amount nonlinearly. Splitting an order does not necessarily avoid the tier because the exchange evaluates aggregate position and order value.
Bybit’s documentation shows maintenance margin as position value multiplied by the tier MMR minus a maintenance-margin deduction. It also notes that displayed initial and maintenance margin can include an estimated taker fee to close. This is why a hand calculation can differ from the live position panel.
Worked tier-change diagnostic
Suppose an account increases notional from $90,000 to $110,000 and the contract moves into a higher maintenance tier at $100,000. The extra $20,000 does more than add its own maintenance requirement: the applicable rate or deduction can change for the aggregate position. Before scaling in, record the live tier and recalculate the entire position. Splitting the scale-in across several orders does not preserve the lower tier when the venue evaluates aggregate exposure.
The liquidation engine watches mark price and equity
Many derivatives venues use mark price rather than the last traded price for risk calculations. Unrealized losses reduce the relevant margin balance. When that balance/equity reaches the maintenance threshold under the venue’s rules, cancellation, partial liquidation, or full liquidation may begin.
The correct question is not “how far can price move at 10×?” It is “how much eligible equity remains above the current maintenance requirement after fees, funding, other positions, and account-mode effects?”
What happens near maintenance margin
Reaching the threshold does not guarantee one clean market close at the displayed liquidation price. Depending on the venue, the engine may cancel open orders, reduce risk, partially liquidate, charge liquidation fees, or transfer the position into an insurance process. Fast markets can change mark price and available equity between updates. Treat the displayed liquidation price as a live estimate and keep the planned stop and account loss limit comfortably before it.
Five mistakes to avoid
- Using initial margin as the maximum possible loss.
- Assuming the maintenance rate is constant across all position sizes.
- Calculating from last price while the venue liquidates from mark price.
- Ignoring funding and closing-fee reserves.
- Applying an isolated-position formula to a cross or portfolio-margin account.
Pre-trade margin audit
- Copy position notional, leverage, margin mode, and account mode from the live order panel.
- Record the applicable risk tier, IM, MM, mark price, and estimated fee to close.
- Calculate the loss at the planned stop and compare the resulting equity with maintenance margin.
- Apply one additional stress: adverse slippage, the next funding debit, or a correlated cross-margin loss.
- Reduce size if the venue’s liquidation process can begin before the strategy invalidation.
This does not predict the exact liquidation print. It verifies that the plan has a buffer under the exchange’s current displayed inputs and makes later review possible.
Record the margin bridge at entry and exit
| Checkpoint | Required evidence |
|---|---|
| Before entry | Notional, leverage, mark price, risk tier, IM, MM, estimated closing fee, margin mode |
| Largest size | Aggregate notional and any tier change after scale-ins |
| Minimum buffer | Lowest eligible equity minus maintenance requirement |
| After funding/fees | Actual debits and their impact on available margin |
| Exit | Whether the planned stop, manual exit, partial liquidation, or liquidation engine closed risk first |
This bridge makes “too much leverage” testable. The review can show whether failure came from position size, a tier jump, cross-account coupling, funding, or an exit that was planned inside the exchange’s maintenance boundary.
Calculate, record, then review
Use the margin calculator to separate notional from opening collateral and the liquidation calculator for a scenario estimate. Before entry, copy the exchange’s live IM, MM/tier, mark price, liquidation estimate, margin mode, and fee assumptions into the trade plan.
After import in TSB Journal, review whether the strategy invalidation or the maintenance threshold came first. If liquidation is inside the planned stop/invalidation, the position is structurally too large or the collateral plan is wrong.
Primary reference
Bybit: Margin Calculations Under Different Margin Modes. Use the live contract specification for the actual trade.
