The difference between Cross Margin and Isolated Margin trading:
1. Cross Margin: This is a trading method that uses all available balance in your margin trading account to support your open position. This means that all the funds in your wallet are used to avoid liquidation (closure) of the position.
- Advantages:
- Reduces the risk of liquidation as the entire balance supports the trade
- Disadvantages:
- If one of the trades incurs significant losses, you may lose your entire account balance, not just the margin allocated for the trade.
2. Isolated Margin is a trading method where a specific amount of margin is allocated for each trade separately, so if your position approaches liquidation, the remaining balance in your account will not be used to support it, only the margin set for that specific trade.
- Advantages:
• You can control the maximum loss for each trade.
• If a specific position is liquidated, you will only lose the margin allocated for it, not your entire balance.
- Disadvantages:
• The risk of liquidation is higher if you do not place sufficient margin for the trade.
• You may need to manually adjust the margin if market conditions change.
In summary:
• If you are a beginner: It is preferable to use isolated trading to limit losses.
• If you have experience and manage large portfolios: Cross trading may be beneficial, but with its risks.
