BeaconMargin Calls Defined
A margin call is a notification or event that occurs when the value of your trading account falls below the minimum required to support your open leveraged positions. In traditional finance, a broker literally calls you to request additional funds. In crypto, the concept is similar but the mechanism is different - margin calls are automated, real-time, and often give you very little time to respond.
When you trade perpetual futures with leverage, you are using borrowed purchasing power. The exchange requires you to maintain a minimum amount of collateral (the maintenance margin) to keep your position open. A margin call is the warning that you are approaching that minimum threshold. If you do not act, the next step is liquidation.
How Margin Calls Work in Crypto
In traditional stock trading, margin calls follow a structured process. Your broker notifies you, gives you a deadline (typically 2-5 business days), and you can deposit additional funds or sell assets to meet the requirement. It is a relatively slow and forgiving process.
Crypto futures trading operates very differently. Markets run 24/7, prices can move dramatically in minutes, and exchanges cannot afford to wait days for you to respond. When your margin ratio drops to a critical level, the exchange's automated system will begin the liquidation process immediately. There is no phone call, no email with a deadline, and no grace period.
Some exchanges and interfaces (including Beacon) do offer configurable alerts that function as an early warning system - a digital equivalent of the margin call. You can set alerts when your margin ratio drops to a specified level, giving you time to act before the exchange's liquidation engine takes over. But these are opt-in tools, not guaranteed protections.
Margin Call vs Liquidation
It is important to understand the relationship between margin calls and liquidation. A margin call is the warning stage - your margin is getting dangerously low. Liquidation is the action stage - the exchange force-closes your position because your margin has dropped below the maintenance requirement.
In practice, many crypto exchanges blur the line between these two concepts. Some platforms do not have an explicit "margin call" phase at all - they simply liquidate positions when the maintenance margin threshold is breached. Others have a tiered system where they first reduce your position size (partial liquidation) before fully closing it.
On Hyperliquid, when your margin ratio hits the maintenance margin level, the liquidation engine takes over. The process is determined by the mark price, not the last traded price, which provides some protection against flash crashes and manipulation. Understanding your exact liquidation price before entering a trade is essential.
What Triggers a Margin Call?
Adverse price movement: The most common trigger. If you are long and the price drops, or short and the price rises, your unrealized PnL becomes negative, reducing your effective margin.
Funding rate payments: If you are on the paying side of the funding rate, each payment reduces your margin balance. Over time, cumulative funding costs can erode your margin to dangerous levels, especially on positions held during periods of extreme funding rates.
Increased position size: Adding to a losing position increases your total margin requirement. If you double down on a trade that is already underwater, you need proportionally more margin, which can push you closer to the threshold.
Withdrawal of funds: In cross margin mode, withdrawing available balance from your account reduces the collateral backing all positions, potentially triggering a margin call on positions that were previously safe.
How to Avoid Margin Calls
Use conservative leverage: This is the single most effective way to avoid margin calls. Lower leverage means your liquidation price is further from your entry, giving your position more room to absorb adverse moves. If 10x leverage makes your liquidation price 10% away, 3x leverage pushes it over 30% away.
Set stop-loss orders: A stop-loss exits your position at a predetermined price before it reaches the liquidation threshold. This gives you control over your maximum loss rather than leaving it to the liquidation engine, which may execute at a worse price due to market conditions.
Maintain a margin buffer: Do not use 100% of your available margin on positions. Keep a reserve that can absorb temporary drawdowns. A common rule of thumb is to use no more than 30-50% of your total account balance for margin at any given time.
Monitor actively: Set up alerts for when your margin ratio drops below comfortable levels. Check your positions regularly, especially during volatile market periods. Use the liquidation calculator to understand your risk before entering trades and as positions evolve.