Written by
Ewelina Skorupka
Published on
Leverage and margin are tools in futures trading that allow traders to open larger positions with smaller capital. Lesson 2 of the Kanga University series focused on these concepts, breaking down how margin works. It also discussed how leverage increases both risk and reward, and how different margin modes influence a trader’s exposure and flexibility.
Whether you are a new trader or a pro, Lesson 2 in the Futures Series will help you navigate these tools on Kanga Futures with clarity. In the meantime, here is a summary of the key points covered in the lesson.
What Is Margin and Why Does It Matter
Margin is the amount of capital a trader must commit as collateral to open and maintain a leveraged position. On Kanga Futures, as with most derivative exchanges, there are two key types of margin. They include initial margin and maintenance margin.
The initial margin is the minimum amount you need to open a position. The maintenance margin, usually lower, is the threshold below which your position may be liquidated. When your account balance drops below this level, the system may automatically close part or all of your position to prevent more losses.
Let’s say you open a long futures position on $WIF, buying 20 Nano contracts when WIF is trading at $100 per unit. The notional value of your position is $2,000.
Assuming Kanga Futures requires an initial margin of 33%, you deposit $660. The maintenance margin is $600.
Now, WIF’s price decreases, and your position value falls. Your equity drops to $540, which is below the maintenance margin. This will cause Kanga Futures to trigger partial liquidation, which closes a few contracts to rebalance your margin.
How Leverage Increases Exposure
Leverage lets traders increase how much they can buy in the market by borrowing funds from the exchange. For example, 5x leverage means you can get $5,000 worth of contracts from an exchange with just $1,000 of your own capital.
It is important to note that leverage increases both profits and losses. For instance, a 10% market move against a 10x leveraged position can wipe out your entire margin. If this happens, it leads to liquidation. This is why managing leverage and understanding the risks you are taking on are important.
Kanga Futures lets you choose your leverage on a per-position basis. As a result, it allows you to adjust risk levels according to the specific asset and its volatility.
Isolated Margin on Kanga
Kanga Futures supports only Isolated margin, as it is more protective. It comes with distinct advantages depending on your strategy.
Isolated margin mode separates the margin for each position. You define how much collateral a single trade can use, and if that trade goes against you, losses are limited to the margin allocated to it.
The Importance of Margin Math and Real-World Examples
Understanding margin is essential. Knowing how much initial margin is required and how price fluctuations affect your maintenance margin will help you manage your trades effectively. Also, you must learn how to calculate the liquidation price to prevent premature closure of positions.
Kanga helps visualize this with real-time updates on margin levels and risk metrics. Still, it’s critical to understand how a price drop of just a few percent can drain your margin.
For example, if you use 10x leverage on a $2,000 position with $200 collateral, a 10% drop in price will erase your margin. That is why many traders on Kanga use lower leverage for better risk control.
Wrapping Up: Mastering Margin for Long-Term Trading Success
Lesson 2 of Kanga University explains how leverage and margin can help you grow faster. From your preferred isolated margin ratio to calculating your liquidation risk, success in futures trading depends on informed decisions.
Kanga Futures provides you with the tools; now it’s your job to use them wisely. Continue to improve your understanding, experiment with small positions, and never stop learning.