In two minutes, understand the difference between - Isolated Margin vs. Cross Margin! Stop blindly opening positions!
Many newcomers often encounter the options of "Isolated Margin" and "Cross Margin" during trading, looking confused and unsure of how to choose. Today, I will explain the difference in the simplest terms!
1. What is Isolated Margin?
Isolated Margin means: you only bear the risk of the margin you use.
For example, if you use 1000 USDT to open a long position, then this 1000 USDT is the maximum you could lose. Liquidation will only occur for this single position's margin and will not affect the other funds in your account.
Advantages: Risk is controllable, suitable for highly volatile markets.
Bilateral positions do not affect each other (Long/Short positions are calculated separately).
Disadvantages: Prone to forced liquidation, especially when leverage is too high.
2. What is Cross Margin?
Cross Margin means: all the balance in your account bears the risk together.
For example, if you have 2000 USDT in your account and open a position of 1000 USDT, but the price drops, the remaining funds in your account will automatically cover the losses until the entire account is wiped out.
Advantages: Strong resistance to volatility, suitable for ranging markets and quantitative strategies.
Preferred for hedging, grid trading, and low-leverage operations.
Disadvantages: If the direction is wrong and the market is extreme, the account could be wiped out.
For better understanding, here's an example:
A and B both have 2000 USDT to open a long BTC position with 10x leverage.
A uses Isolated Margin: only puts in 1000 USDT to open.
B uses Cross Margin: the entire account of 2000 USDT participates in risk resistance.
BTC suddenly drops to 8000 USDT.
A: Loses the 1000 USDT of this position, gets forcibly liquidated, and has 1000 USDT left.
B: The position is not forcibly liquidated, but the account has lost 1000 USDT. If it continues to drop, the entire 2000 USDT could be lost, but if it rebounds, it could turn losses into gains!
In summary:
If you want to control risk and would rather be liquidated than have your account wiped out? Choose Isolated Margin.
If you want to withstand volatility, have strategies, and have expectations? Choose Cross Margin.
Newbies are advised to practice with Isolated Margin and use Cross Margin once they understand the strategies.
If you don't know how to choose a model, can't calculate the liquidation price, or are losing more than you earn when opening positions,
I provide daily live explanations in my circle, with charts and points, guiding you from confusion to stable profits. Whether you join is up to you; opportunities are always for those who are prepared!
