What is Margin Trading?
Margin trading allows you to borrow funds from an exchange to trade with more capital than you own. By providing collateral (margin), you can open larger positions using leverage. This amplifies both potential profits and losses.
Your Margin
$1,000
Leverage
10x
Position Size
$10,000
Cross Margin Explained
Cross Margin Mode
In cross margin mode, your entire available account balance is used as collateral for all open positions. This means all positions share the same margin pool, and profits from one position can help prevent liquidation of another.
How It Works:
- All available balance acts as margin for all positions
- Unrealized profits can offset unrealized losses
- Liquidation only occurs when account margin ratio falls below maintenance level
- One large losing position can liquidate your entire account
Isolated Margin Explained
Isolated Margin Mode
In isolated margin mode, you allocate a specific amount of margin to each position. Each position has its own dedicated margin, and liquidation of one position does not affect others.
How It Works:
- Each position has its own isolated margin pool
- Maximum loss is limited to the allocated margin
- You can manually add or remove margin from positions
- Rest of your account remains protected from liquidation
Interactive Comparison
Key Differences
| Feature | Cross Margin | Isolated Margin |
|---|---|---|
| Margin Usage | Shared across all positions | Dedicated to single position |
| Liquidation Risk | Entire account at risk | Only position margin at risk |
| Liquidation Buffer | Larger (full balance) | Smaller (position margin only) |
| Maximum Loss | Full account balance | Position margin only |
| Risk Management | Harder to manage per position | Easier per position control |
| Best For | Hedging, experienced traders | Beginners, high-risk trades |
When to Use Each
Use Cross Margin When
- Hedging positions (long and short same asset)
- Experienced with risk management
- Running multiple correlated positions
- Want to avoid frequent small liquidations
Use Isolated Margin When
- You are a beginner to margin trading
- Taking high-risk or speculative trades
- Want to limit maximum loss per trade
- Testing new trading strategies
Liquidation Price Calculator
See how margin type affects your liquidation price
Position Size
$10,000
Liquidation Price
$45500.00
Distance to Liq.
9.0%
Unrealized P&L
+$0.00
Isolated Margin: Maximum potential loss is your position margin only
Max Loss: $1,000
Liquidation Price Examples
Isolated Margin - 10x Long
Margin
$1,000
Leverage
10x
Liq. Price
$45,500
Max Loss
$1,000
With $1,000 isolated margin at 10x, your liquidation price is around $45,500. Maximum loss is limited to $1,000.
Cross Margin - 10x Long
Margin
$5,000
Leverage
10x
Liq. Price
$42,750
Max Loss
$5,000
With $5,000 account balance in cross margin at 10x, liquidation price is lower at $42,750, but you risk losing your entire $5,000.
Isolated Margin - 25x Long
Margin
$1,000
Leverage
25x
Liq. Price
$48,200
Max Loss
$1,000
High leverage at 25x brings liquidation much closer to entry. Even small moves can liquidate, but loss is still capped at $1,000.
Risk Management Tips
Important Risk Guidelines
- Always use stop-loss orders to limit potential losses
- Never risk more than 1-2% of your account on a single trade
- Start with isolated margin until you understand the mechanics
- Use lower leverage (5x-10x) until you gain experience
- Monitor your positions regularly and adjust margin if needed
Pros and Cons
Cross Margin
Pros
- Lower liquidation risk due to larger margin pool
- Profits from one position can offset losses from another
- More capital efficient for hedging strategies
- No need to manually add margin to positions
Cons
- Entire account balance is at risk
- One bad trade can wipe out your account
- Harder to manage risk per individual position
- Not recommended for beginners
Isolated Margin
Pros
- Maximum loss is limited to position margin
- Better risk management per trade
- Protects rest of your account from liquidation
- Ideal for high-risk or speculative trades
Cons
- Higher liquidation risk per position
- Need to manually manage margin for each position
- Can be liquidated even with funds available
- Less capital efficient for multiple positions
Frequently Asked Questions
Best Exchanges for Margin Trading
These exchanges offer both cross and isolated margin with competitive fees.
Key Takeaways
Cross margin uses your entire balance as collateral, offering more protection against liquidation but risking more capital.
Isolated margin limits your risk to the specific amount allocated to each position, ideal for beginners.
Choose cross margin for hedging strategies; choose isolated margin for high-risk trades.
Always use proper risk management regardless of margin type - set stop-losses and never risk more than you can afford to lose.
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