Isolated Margin Mode and Cross Margin Mode are two common margin modes in perpetual futures trading. Each mode has different risk characteristics and is suitable for different trading styles and risk preferences.
I. What Is Isolated Margin Mode?
1.1 Definition
In Isolated Margin Mode, a specific amount of margin is assigned to a single position, and the risk of that position is separated from the rest of your account.
If liquidation occurs, the maximum loss is generally limited to the margin allocated to that position (excluding fees and any additional losses under extreme market conditions, if applicable).
Users may be able to manually add margin (and, depending on product settings, enable automatic margin add) to reduce the liquidation risk for that specific position.
1.2 Applicable Scenarios
Isolated margin is commonly used in the following situations:
- Beginners or risk-averse traders
Crypto markets can be highly volatile. Beginners may be liquidated due to sudden price swings. Isolated margin helps limit losses to one position and protects other funds in the account.
Example: A trader uses 100 USDT isolated margin to trade BTC perpetual futures. If liquidation happens, the loss is limited to that 100 USDT (excluding fees).
- Multi-token or multi-strategy trading
Suitable for trading multiple assets (e.g., BTC, ETH, SOL) or running different strategies (e.g., short-term vs. long-term, arbitrage). Each position is managed independently.
Example: Long BTC while short ETH. Isolated margin prevents one position’s loss from consuming margin intended for another position.
- High volatility or black swan events
During extreme events, markets may move sharply in one direction. Isolated margin confines risk to a specific position and helps protect the rest of the account.
Example: In a sharp crash of a high-volatility token, cross margin may draw on more account funds, while isolated margin generally limits impact to the isolated position.
- Small accounts or experimental trading
Useful when testing new tokens or strategies with limited capital.
Example: Allocate a small margin amount to a new token futures trade to avoid exposing the entire account to large swings.
- High-leverage short-term trading
Suitable for short-term trading where leverage may be higher (e.g., 50x, 100x). Risk isolation can help prevent one fast-moving trade from impacting other funds.
Example: Trading BTC perpetual futures on a 5-minute timeframe—isolated margin keeps each position’s risk separate.
- Precise risk control per trade
Ideal for traders who want strict control of risk on each position.
Example: Allocate a fixed portion of account equity (e.g., 5%) per trade to keep losses controlled.
1.3 Advantages of Isolated Margin Mode
- Independent risk per position: One position’s liquidation generally does not affect other positions or the remaining account balance.
- Flexible margin management: Margin can be adjusted per position based on its risk profile.
II. What Is Cross Margin Mode?
2.1 Definition
In Cross Margin Mode, positions share margin from the available balance of the account (typically within the same settlement currency/account). This means losses on one position can consume more of the account’s funds, potentially impacting other positions.
If liquidation occurs, the trader may lose a large portion—or in extreme cases, all—of the margin available in that account/currency that is being shared.
2.2 Applicable Scenarios
Cross margin is commonly used in the following situations:
- Reducing liquidation risk during volatility (higher “survivability”)
Cross margin uses more of the account’s funds as a buffer against price fluctuations, which can reduce liquidation risk compared with isolated margin (depending on position size and overall account exposure).
Example: Using high leverage to long ETH—cross margin may provide a larger buffer from the account balance to tolerate short-term pullbacks.
Note: Cross margin does not guarantee profit or prevent liquidation. It primarily changes how margin is shared and how liquidation risk is distributed across positions.
- Long-term trend trading
Suitable for traders confident in a longer-term view (e.g., BTC/ETH trend positions). Cross margin can help positions withstand short-term drawdowns by sharing margin across the account.
- Hedging in high-volatility markets
When hedging (e.g., long and short positions), shared margin and account-level management can help smooth equity fluctuations. In some cases, profits and losses across positions may partially offset, reducing overall volatility of account equity.
2.3 Advantages of Cross Margin Mode
- Higher capital efficiency: More of the account balance (and potentially unrealized PnL) can help support positions, improving utilization.
- Simpler operation: No need to allocate margin for each trade manually.
- Stronger buffer against volatility: When a position experiences floating losses, other available funds may help reduce immediate liquidation risk.
Reminder: In extreme market conditions, losses under cross margin can expand and may lead to a near-total loss of the shared margin funds in that account/currency.
Ⅲ. How to Choose
- Choose Isolated Margin if you want clear, position-level risk limits and prefer to protect the rest of your account from a single trade’s failure.
- Choose Cross Margin if you need more margin buffer across positions and understand that losses can spread across your account balance.
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