Margin trading is borrowing funds to take a position larger than your capital. Deposit $1,000, borrow $4,000, trade $5,000. Your gain or loss is on the full $5,000; your capital at risk is the $1,000.
The borrowed amount is the loan. Your deposit is the margin — collateral the lender holds against it.
Spot margin versus perpetuals
Spot margin trading borrows the actual asset or the cash to buy it. You pay interest on the loan and you own the position outright.
A perpetual future gives the same leveraged exposure without a loan. Instead of interest you pay or receive funding, and you never hold the underlying. In crypto, perpetuals have largely replaced spot margin because the mechanics are simpler and the venues are deeper.
The word “margin” survives in perpetuals as the collateral you post — initial margin to open, maintenance margin to keep the position alive.
Cross and isolated
Cross margin uses your whole account as collateral for every position. Isolated margin walls off a fixed amount per position. Cross is more capital-efficient and more dangerous; isolated caps the damage from any one trade.
The cost that isn’t obvious
Leverage multiplies exposure, and exposure multiplies every cost — fees, funding, slippage. A 10x position pays 10x the trading fees relative to your capital. Strategies that look marginally profitable at 1x are often losers at 5x for that reason alone.