Collateral Buffer

A collateral buffer is the excess value deposited beyond the minimum required to maintain a position. This extra margin provides a cushion against price volatility, preventing accidental liquidations.

Experienced traders maintain a larger buffer during periods of market uncertainty. By reducing the probability of liquidation, a buffer allows for longer-term participation in a strategy.

It is a critical risk management tool in any leveraged trading setup. The size of the buffer should be adjusted based on the volatility of the underlying assets.