What Is Margin (Collateral)?
Margin is the collateral deposited with an exchange to open and maintain a leveraged position. The minimum amount required to keep a position open is called the maintenance margin, and the amount required to open a position is called the initial margin. How this margin is managed depends on which margin mode you select.
What Is Cross Margin?
Cross margin shares the entire available account balance as collateral across all open positions.
- Advantage: The risk of individual positions being liquidated is lower, because free balance is automatically used to top up margin.
- Advantage: Capital efficiency is higher when running multiple positions simultaneously.
- Disadvantage: A large loss on one position exposes the entire account balance to risk.
- Disadvantage: In the worst case, you can lose your entire account balance.
What Is Isolated Margin?
Isolated margin assigns margin to each position individually. A loss on one position does not affect other positions or the remaining account balance.
- Advantage: Risk is capped at the margin assigned to that position, giving you control over your losses.
- Advantage: Independent risk management is possible on a per-position basis.
- Disadvantage: Individual positions can be liquidated more easily during large price swings.
- Disadvantage: You must manually add margin if needed, which requires more active management.
Cross Margin vs. Isolated Margin: Side-by-Side
A quick comparison of the key differences between the two margin modes.
| Item | Cross Margin | Isolated Margin |
|---|---|---|
| Margin scope | Entire account balance | Allocated per position |
| Liquidation risk | Lower (balance acts as a buffer) | Higher (only allocated margin is used) |
| Maximum loss | Entire account balance | Allocated margin only |
| Risk management | Harder | Easier |
| Best for | Hedging, low leverage | High leverage, beginners |
When Should You Use Each Mode?
A guide to choosing the right margin mode based on your situation.
- Beginners: Use isolated margin. Losses are capped, making it suitable for learning.
- High-leverage trades: Use isolated margin to confine risk to the specific position.
- Hedging: Cross margin is more appropriate. Opposing positions can supplement each other's margin.
- Low-leverage, long-term positions: Cross margin can improve capital efficiency.
- Running multiple positions: Isolated margin is safer when you want to separate risk between positions.
Try Both Margin Modes on TradeHub
TradeHub's paper trading supports both cross margin and isolated margin. Experience the differences between the two modes first-hand with no real-money risk, and find the margin strategy that suits you best.
