Isolated and cross margin

Isolated margin limits a position's risk to its own collateral, while cross margin uses your whole available account balance to keep positions from being liquidated.

How it works

In isolated mode each position has its own collateral. If it is liquidated, you lose only that collateral and the rest of your balance is untouched. The risk is clear up front, but liquidation comes sooner because nothing tops the position up.

In cross mode your free balance automatically backs all open positions. Liquidation is pushed further away, but if the market keeps going against you, you can lose your entire futures balance, not just one position. Profit on one position can offset loss on another.

Isolated mode is usually easier for beginners because losses are capped. Cross is used by experienced traders running hedged positions with tight control of total risk. You can often switch modes only when no positions are open on that contract.

Example with numbers

You have $1,000. You open a $2,000 BTC long with $200 margin (10x). In isolated mode a drop of about 9.5% liquidates it and you lose $200, keeping $800. In cross mode the position draws on all $1,000, so liquidation only comes at a drop of about 50%, but then nearly the whole balance is gone.

Common mistake

The main mistake is trading in cross mode thinking liquidation is far away, so it must be safe. A distant liquidation means the whole account is on the line. Use isolated margin and a stop-loss, and if you choose cross, keep only money you can afford to lose in the futures account.

Questions and answers

What are isolated and cross margin in simple terms?

With isolated margin a position risks only its own collateral. With cross margin it can draw on your whole balance to avoid liquidation.

Should a beginner use isolated or cross margin?

Usually isolated: your loss is capped at the position's margin. Cross suits experienced traders managing several positions together.

Can you lose your whole balance with cross margin?

Yes. In cross mode your entire available futures balance acts as collateral, and a big move can wipe it out.

Isolated and cross margin

How it works

Questions and answers

Related terms

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