How to choose between full margin and isolated margin? Understanding the margin mechanism is key to avoiding liquidation risk.

You often hear about “Cross Margin” and “Isolated Margin” during trading, but many people can’t clearly distinguish between these two modes. In fact, it’s not just a difference in names; the risk management logic behind them is completely opposite. Choosing the wrong mode could directly impact your fund safety.

Cross Margin Mode: Risk Diversification, More Comprehensive Protection

Cross margin mode allows all available account balance to serve as collateral to support positions. Simply put, it treats the entire account as a unified collateral pool, enabling the use of all funds to alleviate pressure when there are unrealized losses.

The biggest advantage of this approach is that the liquidation probability is very low. As long as leverage is controlled properly, even if one position incurs unrealized losses, other funds can “rescue” the position. That’s why hedgers especially prefer using cross margin mode—risk can be effectively dispersed, preventing forced liquidation due to a single position’s unrealized loss.

Isolated Margin Mode: Risk Isolation, Losses Are Controllable

The core of isolated margin mode is margin isolation. Each position is allocated a fixed amount of margin, which can only be used for that specific position and cannot be transferred elsewhere.

The benefit of this approach is that losses can be limited. If a position gets liquidated, you only lose the margin allocated to that position, without affecting other funds in the account. However, the trade-off is that liquidation risk is higher—in highly volatile markets with large leverage, isolated margin positions are more prone to forced liquidation due to insufficient margin.

The Fundamental Difference in Margin Mechanisms

To fully understand these two modes, you need to grasp the underlying margin operation logic:

Cross Margin (Cross Collateral): All positions share the same margin account, and the entire available balance can be mobilized. It’s like putting money into a common pool, accessible by anyone who needs it.

Isolated Margin (Independent Collateral): Each position has its own independent margin account, with no interference between them. It’s like allocating a separate fund for each position, with complete isolation between positions.

How to Choose Based on Your Situation?

Scenarios for choosing cross margin:

• You are an institutional trader or an experienced investor
• Mainly engaging in hedging transactions
• Leverage controlled at 3x or below
• Want to maximize capital efficiency

Scenarios for choosing isolated margin:

• You are a beginner investor still learning
• Want to clearly control the risk limit for each trade
• Expect significant market volatility
• Prefer to experiment with high leverage using small capital

Cross margin with higher leverage is more suitable for experienced traders with strong risk awareness; isolated margin leverage is more friendly to beginners, helping to limit potential losses within expected ranges. Choosing the right mode is like adding a safety lock to your funds.