The margin used in a trade is a very important factor in risk management. We will explain why in future episodes of this course. Many people enter trades without precise knowledge of how much margin they used. This shouldn't be you 😂😂

It is important to point out here that your entire account balance can also be used as margin and in this case, your applied leverage would be just 1x. This is another risky move many newbies make that get them liquidated. Wondering what liquidated means 😂, Well, it simply means to lose all the margin you used for a trade; More on this later.

2.POSITION SIZE: This refers to the amount of money you are controlling in the market. Your margin multiplied by the leverage used gives the position size. In the aforementioned scenario, where you funded your account with $500, but used a $5 margin. If you decide to use a 10x leverage, that means that your position size would be $50. That is; 10x leverage multiplied by $5 margin=$50 as position size.

This simple calculation shows the impact of leverage on your margin. The bigger the leverage, the bigger the position size and vice-versa.

If you are making a profit or loss of 10% on your position size, how it affects your account depends on whether you are using cross margin mode or isolated margin mode, but what are these modes?

Well, let's look at them in part 3 of this course but to conclude, it is worth pointing out that some trading platforms can label the quantity of tokens you bought with the $50 in the above example as position size. Bybit is one such exchange. This might look confusing sometimes but let's look at it closely.

 If you bought a token called, say; PIZZA and one of it traded at a dollar when you bought it. That is; 1 PIZZA=$1, That means your entry price was $1. 

Then with a position size of $50, you would purchase 50 units of PIZZA, hence your position size in terms of the units of PIZZA purchased would be 50, which is also equal to your position size in dollars gotten by doing:

💥50 units of PIZZA multiplied by the $1 (entry price) per PIZZA 

💥Or the $5 margin multiplied by the 10x leverage.

Watch out for part 3!!