Margin Trading, also known as buying on margin, refers to the practice of the exchange holding a percentage of the collateral amount to trade a financial asset.
Margin trading embodies the concept of leverage and initial margin.
Since such use of financial leverage can potentially magnify gains but could also saddle the trader with devastating losses, leverage has the well-deserved reputation of being a double-edged sword.
A trader engaging in margin trading, he/she has 1 BTC and is using 5x leverage.
Initial Margin= 1 BTC
Contract Value= Initial Margin x leverage= 5 BTC
Initial Margin Rate= 1/leverage= 20%
In Margin Trading, if the position's margin is lower than Maintenance Margin, it will be liquidated.