The minimum amount of capital that must be maintained in a futures trading account to keep positions open. If account equity falls below this level due to losses, the trader may receive a margin call or have positions liquidated to restore the required balance.
Why It Matters
- 1Maintenance margin is critical for risk control in futures trading.
- 2Falling below it can lead to forced liquidation, which can quickly lock in losses and potentially breach prop firm drawdown rules.
Example
A trader holds a futures position requiring a maintenance margin of $5,000. If their account equity drops below this level due to market losses, the broker or firm may automatically close part or all of the position to prevent further risk.
Common Mistakes
- ✖Confusing maintenance margin with initial margin
- ✖Assuming positions can be held regardless of account balance
- ✖Ignoring how fast losses can trigger liquidation in volatile markets
- ✖Not accounting for margin requirements when sizing positions