Cross vs Isolated Margin
Glossary · Derivatives
Cross margin lets every position on the account draw on the whole balance, so a losing trade can consume the collateral of a winning one before it liquidates. Isolated margin walls each position off with its own collateral, capping the loss at what was assigned. The choice decides what a liquidation can take.
"Isolated: one bad trade burns one pot. Cross: one bad trade can burn the whole account while the other trades were green."
Cross margin is efficient — unrealised profit on one position props up another, and the liquidation price sits further away because the entire balance is behind it. That efficiency is also the danger: a single position gone wrong keeps drawing collateral until the account is empty, and the liquidation, when it comes, is of everything at once. Isolated margin has a nearer liquidation price for the same size, but the damage is bounded, and adding margin to it is a conscious act.
A rule that survives contact with the market: use isolated for anything you would not add to on the way down, and treat cross as leverage on your whole account, because that is what it is. Liquidation cascades are mostly cross-margined accounts that had ten positions and one thesis. If you cannot say what a 15% adverse move does to your total balance, you are in cross without knowing it.
Related jargon
Questions
- What is Cross vs Isolated Margin in crypto trading?
- Cross margin lets every position on the account draw on the whole balance, so a losing trade can consume the collateral of a winning one before it liquidates. Isolated margin walls each position off with its own collateral, capping the loss at what was assigned. The choice decides what a liquidation can take.
- How would a trader say it?
- Isolated: one bad trade burns one pot. Cross: one bad trade can burn the whole account while the other trades were green.
Part of the Crypto Jargon glossary — every term, decoded the way a trader would say it.
Crypto Jargon
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