学习

Differences Between Isolated Margin and Cross Margin Contracts

1. Isolated Margin Contract: Independent Margin Model
An isolated margin contract means that each trade is calculated with its own margin independently. In simple terms, when you open an isolated margin contract, only the margin used for that specific trade is at risk. Even if market fluctuations lead to the liquidation of that trade, it will only affect the margin for that trade and will not impact the other funds in your account.
For example, if you have 10,000 USDT in your account and use 2,000 USDT to open an isolated margin contract, when market changes lead to the liquidation of that contract, you will only lose that 2,000 USDT, and the remaining 8,000 USDT in your account will remain safe.

2. Cross Margin Contract: Shared Margin Model
In contrast, a cross margin contract employs a different margin mechanism. In cross margin mode, your entire account balance is considered as margin. This means that if you open multiple cross margin contracts simultaneously, they will share the same margin pool.
The advantage of this model is that when the market moves in your favor, you can achieve higher returns. However, the risk also increases. If the market moves against your trades, it may quickly deplete the margin for your entire account, potentially triggering liquidation for the whole account.
For example, if you have a 10,000 USDT account and simultaneously open three cross margin contracts, each occupying a portion of the margin. When market changes cause any of the contracts to approach liquidation, it will affect the margin level of the entire account. If the margin is insufficient to support all contracts, it may lead to the liquidation of the entire account.

3. Risk Control: Exercise Caution and Allocate Funds Wisely
After understanding the differences between isolated and cross margin contracts, novice investors should pay more attention to risk control. First, it is not recommended for beginners to easily attempt contract trading unless you have a deep understanding of the spot market. Second, if you decide to try contract trading, be sure to operate cautiously, allocate funds wisely, and avoid excessive leverage and overtrading.
$BTC