Margin Deep Dive: Cross Margin vs Isolated Margin

In an earlier article I wrote about the basics of Margin where I described the way that margin works based off the concept of using borrowed funds to leverage your own position.

This article expands on the topic and explores how margin can be used in different ways across the Bitget exchange. 

In essence, there are two mechanics to use margin. Cross Margin and Isolated Margin Both mechanics allow trading with a leveraged position. This can be useful as it allows a trader to engage in futures trading activities without having a lot of cash at hand. However, the underlying factors vary wildly. So Lets explore the two options Bitget provides, and how one can use it.


First things first. In the trading portal, the preferred mechanic can simply be selected as shown above. It will provide two options. Isolated and Cross.


Isolated

In this mode, only your allocated funds to the specific trade is at risk. When you open a trade in isolated mode, the position size equals the margin that you use. This means that, in the event of a liquidation, you will lose the funds you have allocated to the trade. In other words, whatever you put up as margin is at risk.

Isolated margin is useful for speculative positions. By isolating the margin the position uses, you can limit your losses to the initial margin set, and thus helps short-term speculative trade ideas that turned out incorrectly. In a volatile market, a highly leveraged position can lose equity quickly.

Cross

This mode utilises your entire account balance as margin, meaning that in the event of a liquidation, one would lose all funds in the entire account balance.Any realised PNL from other positions can aid in adding margin on a losing position with the same settlement cryptocurrency.

This margin method is useful when using advanced trade management such as hedging, as the increased margin allows for more flexibility and wiggle room. This does come at the risk of putting your entire account balance on the line. Therefore it is highly recommended to do thorough research before attempting to trade. 

Coin-M Futures 

Where these mechanics truly shine is Bitgets unique Coin-M futures. Coin-M futures allow for a joint margin pool, where funds originating from different cryptocurrency can be used as collateral. Click “here” to read more

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Disclaimer:


The information provided above is not financial advice but for educational and entertainment purposes. Please do your own due diligence or consult a financial advisor before investing in any digital assets.

All opinions expressed on Bitget’s Soapbox (also known as the ‘Soapbox’) are opinions of individual traders using the Bitget platform, and do not reflect the opinions of Bitget or its affiliate companies and partners. The Soapbox author’s opinions are based upon information they confirm to be reliable, but neither Bitget nor its affiliates warrant its complete accuracy, and it should not be relied upon as such.