Dear friends, today I must talk to you about two particularly key concepts in cryptocurrency trading—using all funds and isolated margin! Don't be fooled by their names being just a couple of characters different; the differences in practical operation are huge, especially in terms of the impact on our wallets, which is not negligible. Newbie friends can easily fall into pitfalls if they don't understand it, and even experienced traders need to switch flexibly based on the situation. So make sure to save this article!
First, let's talk about the all-funds model. Simply put, it means all the money in your account, whether it's the principal you've just deposited or the profits you've earned before, will be treated as a 'big pool.' All your positions will draw funds from this pool as margin.
To put it simply, it's like all your savings are kept in one drawer at home. Whether it's for groceries, paying rent, or enrolling your child in tutoring classes, you take money from this drawer. How much you spend depends entirely on how much is left in the drawer.
The benefits of this model are very obvious, the utilization rate of funds is incredibly high! For example, if you have confidence that a certain coin will rise and you open a long position, but another coin accidentally drops a bit and you incur some losses, no problem. The profits you earned previously or other funds in your account can help cushion this. As long as there is enough money in the big pool, you don't have to worry about this small loss causing a liquidation.
So in a market where trends are particularly clear, such as during a bull market, using all your funds is particularly effective, allowing you to make full use of your capital to earn more.
But the risks also need to be mentioned, as the market might take a 'roller coaster' turn. If your leverage is relatively high, for example, 20x or 50x, and suddenly the market crashes, leading to losses across all positions, the entire pool of funds might be almost depleted in an instant. In severe cases, it might even cause a margin call, meaning you could lose more than your principal. At that point, the exchange might liquidate all your positions to stop losses, which would be truly heartbreaking.
Now let's talk about the isolated margin model, which is easier to understand. The margin for each trade is independent; each manages its own, without interference. When you open the first trade, you set aside 1000 as margin. Whether this trade makes a profit or a loss, it only relates to that 1000 and won't touch other funds in your account.
It's like you opened a separate bank card for each family member. Your husband's card is for repaying the mortgage, your wife's card is for daily expenses, and your child's card is for the education fund. They do not interfere with each other; when one card runs out of money, the others can be used as usual.
The biggest advantage of this model is that it isolates risk particularly well! It is suitable for those who like to try new strategies. For example, if you want to try short-term contracts or make a small investment, even if this particular trade incurs a loss, it won't affect your other positions and funds. It's like putting a 'safety lock' on your wallet.
Moreover, its leverage is particularly flexible. You can set this trade to have 5x leverage and another trade to have 10x leverage, completely based on your own judgment.
However, isolated margin also has its headaches, as it has relatively weak risk resistance. Because the margin is independent, if the market goes against you and the margin for this trade is nearly lost, it won't find money from elsewhere to cover it, resulting in an immediate liquidation. That margin could be gone in an instant, so when using isolated margin, you must calculate whether the margin is sufficient, and not be too impulsive.
So how should you choose? There is actually no absolute right or wrong; it all depends on your trading strategy and your judgment of the market.
If you are particularly confident about the upcoming market trend, for example, feeling that a bull market is about to arrive and you want to utilize all your funds to earn more returns, then using all your funds is definitely the first choice, allowing your capital to work to its maximum potential.
But if you want to try a new trading strategy, or you like to do high-leverage short-term trading, or you just want to invest a small amount to test the waters and are afraid that a single mistake will lose all your money, then isolated margin is more suitable for you. It can help you control risk within a certain range, and even if you incur losses, it won't be catastrophic.
In short, using all funds and isolated margin is like having two 'weapons' in cryptocurrency trading. There's no one better than the other; the key is when and how you use them. Newbie friends can try them out more at the beginning and gradually find the model that suits them.