Cross margin vs isolated margin
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
Cross margin pools the whole account balance as collateral for every position; isolated margin ring-fences a fixed amount per position. Under cross, one losing position can consume the entire account. Under isolated, the loss stops at the allocated amount — but liquidation comes sooner.
Key points
- Cross shares the whole balance across positions
- Isolated assigns a fixed amount per position
- Under cross, one loss can drain the account
- Isolated caps the loss but liquidates sooner
Definition
Two ways of allocating collateral: cross margin treats the entire account balance as backing for all positions, while isolated margin backs each position with only the amount assigned to it.
Isolated margin lets you say 'this position is backed by 50,000 yen and no more'. When losses reach that amount the position is liquidated, and the rest of the account is untouched. The cap is clear, but the smaller the allocation, the smaller the adverse move needed to close it.
Under cross margin every yen in the account backs every position. A position in drawdown is supported by the rest of the balance and so survives longer. If its losses keep growing, however, they consume the whole balance as collateral, and the entire account can be lost.
It is more accurate to say the two reshape risk than that one is safer. Isolated caps the loss but liquidates more often; cross liquidates less readily but exposes the whole account. Under extreme moves, either arrangement can leave losses exceeding the collateral.
Watch out for
- · Under cross margin, a single losing position can wipe out the whole account
- · Even isolated margin can produce losses beyond the allocated amount in violent moves
- · Naming and behaviour differ by exchange, and switching modes may be blocked while a position is open