> ## Documentation Index
> Fetch the complete documentation index at: https://docs.ascend.market/llms.txt
> Use this file to discover all available pages before exploring further.
# Margin Model
> How margin and leverage define your position risk
Every position on Ascend is backed by margin. Margin is the capital you commit to a trade. It enables leveraged exposure, absorbs losses, and defines the boundary of your risk.
Understanding margin is essential to managing positions effectively.
***
## How Margin Works
When you open a position, you post margin as collateral. This margin serves three purposes:
* Enables leveraged exposure to probability movement
* Absorbs unrealized losses as prices move against you
* Defines the maximum you can lose on the trade
The more margin you post relative to your position size, the more room your position has to absorb adverse price movement.
***
## Initial Margin
Initial Margin (IM) is the capital required to open a position.
It is determined by your position size and selected leverage:
```
Initial Margin = Position Notional / Leverage
```
**Example:**
You want to open a 1,000 USDC notional position at 10x leverage.
```
Initial Margin = 1,000 / 10 = 100 USDC
```
You post 100 USDC to control 1,000 USDC of exposure.
1,000 USDC position requires 200 USDC margin. More cushion against adverse moves.
1,000 USDC position requires only 50 USDC margin. Less room for error.
***
## Maintenance Margin
Maintenance Margin (MM) is the minimum equity required to keep a position open.
It is defined as a fraction of your position notional:
```
Maintenance Margin = Maintenance Rate × Position Notional
```
The maintenance rate is set per market, typically between 1% and 5%.
**Example:**
Your position has 1,000 USDC notional. The market has a 2.5% maintenance rate.
```
Maintenance Margin = 0.025 × 1,000 = 25 USDC
```
As long as your equity stays above 25 USDC, your position remains open. If equity drops to or below this level, liquidation may be triggered.
***
## Position Equity
Your position equity represents the real-time value of your position. It fluctuates constantly as prices move.
```
Equity = Initial Margin + Unrealized PnL − Accrued Funding
```
Where:
* Initial Margin is what you posted when opening the position
* Unrealized PnL changes as the Mark Price moves
* Accrued Funding is the net funding paid or received
**Example: Price moves in your favor**
You open a LONG position with 100 USDC margin. The probability moves up, generating +30 USDC unrealized PnL. You have paid 2 USDC in funding.
```
Equity = 100 + 30 − 2 = 128 USDC
```
Your position equity is now 128 USDC.
**Example: Price moves against you**
Same position, but the market moves against you by 30 USDC instead:
```
Equity = 100 + (−30) − 2 = 68 USDC
```
Your equity dropped to 68 USDC.
***
## Margin Ratio
The margin ratio shows how healthy your position is relative to the liquidation threshold:
```
Margin Ratio = Equity / Maintenance Margin
```
| Margin Ratio | Status |
| ------------ | ----------------------------------------------------- |
| > 2.0 | Healthy. Comfortable buffer. |
| 1.5 to 2.0 | Caution. Monitor closely. |
| 1.0 to 1.5 | Warning. Consider adding margin or reducing position. |
| ≤ 1.0 | Liquidation zone. Position may be closed. |
**Example:**
Your equity is 68 USDC. Maintenance margin is 25 USDC.
```
Margin Ratio = 68 / 25 = 2.72
```
You are in healthy territory. But if equity drops to 30 USDC:
```
Margin Ratio = 30 / 25 = 1.2
```
Now you are in the warning zone. Time to consider adding margin or reducing your position.
***
## Isolated Margin
Ascend uses isolated margin at the position level.
This means:
* Each position has its own margin
* Risk is fully contained within each position
* One position cannot draw collateral from another
* Losses on one position do not affect others
**Example:**
You have two positions:
| Position | Margin | Status |
| ---------------------- | -------- | ---------------- |
| BTC directional LONG | 100 USDC | Healthy |
| Election outcome SHORT | 50 USDC | Near liquidation |
If the election position gets liquidated, you lose at most 50 USDC. Your BTC position is completely unaffected.
This isolation makes risk predictable. You always know the maximum you can lose on each trade.
***
## Leverage and Risk Relationship
Higher leverage means:
* Less margin required to open the same position
* Greater sensitivity to price movement
* Liquidation price closer to entry price
* Less room for the market to move against you
| Leverage | Margin for 1,000 USDC Position | Price Move to Liquidation |
| -------- | ------------------------------ | ------------------------- |
| 5x | 200 USDC | \~17.5% |
| 10x | 100 USDC | \~7.5% |
| 20x | 50 USDC | \~2.5% |
The numbers above assume a 2.5% maintenance rate. Actual liquidation prices depend on market parameters.
***
## Managing Your Margin
You can actively manage margin on open positions:
Deposit additional margin to increase your equity buffer. This moves your liquidation price further away from the current price.
**When to use:** Your position is under pressure but you believe the market will reverse.
Withdraw excess margin from a profitable position. This frees up capital for other trades.
**When to use:** Your position is healthy and you want to deploy capital elsewhere.
Close part of your position to lower your maintenance margin requirement and improve your margin ratio.
**When to use:** You want to reduce risk without closing entirely.
***
## Risk Parameters by Market
Each market defines its own margin parameters:
| Parameter | Description | Typical Range |
| --------------------- | ----------------------------- | ------------- |
| Maximum Leverage | Highest allowed leverage | 5x to 50x |
| Maintenance Rate | Percentage of notional for MM | 1% to 5% |
| Minimum Position Size | Smallest allowed position | Varies |
These parameters are set at market creation and visible to all traders. Higher volatility markets typically have lower maximum leverage and higher maintenance rates.
***
Learn when and how positions get liquidated