Margin Selection Guide: How to Choose Between Cross Margin and Isolated Margin

In leveraged trading, choosing the correct margin mode is like selecting a container for your risk tolerance—one that holds a smaller amount, and another that holds a larger amount. The two margin configurations, cross margin and isolated margin, determine how you allocate funds during trading and your loss boundaries.

Isolated Margin Mode: The Choice of Risk Isolation

What is Isolated Margin

In isolated margin mode, each position’s margin is independent and fixed. The leverage setting when opening a position determines how much margin that position requires. Simply put, no matter how much that position loses, it can only lose the margin specifically locked for it.

Calculation is straightforward

Isolated margin for a position = Position size × Entry price ÷ Leverage

For example: You buy 0.1 BTCUSDT contract at a price of 50,000 USDT with 25x leverage. The isolated margin = 50,000 × 0.1 ÷ 25 = 200 USDT. This 200 USDT becomes your risk boundary for this position.

Advantages of Risk Isolation

When the position’s loss causes the margin to fall below the maintenance margin, a forced liquidation is triggered. However, this only affects that specific position and does not impact your other funds in the same contract account. In other words, your other positions’ funds are fully protected.

Cross Margin Mode: Flexible Fund Allocation

Operational Logic

In cross margin mode, all available balance in your contract account is treated as a shared margin pool. Multiple positions can share this pool of funds, providing greater liquidity within the account.

Initial Margin vs. Actual Margin

Here, two concepts are distinguished. The initial margin is calculated as:

Cross margin initial margin = Position size × Entry price × (1 ÷ Leverage)

But the actual margin for a position equals all available balance in your account.

For example, buying 0.1 BTCUSDT at 50,000 USDT with 25x leverage, if your account has 1,000 USDT, the initial margin is 200 USDT, but the actual margin used is the entire 1,000 USDT.

Cost and Benefit of Risk Concentration

In cross margin mode, a position will only be forcibly liquidated if its loss exceeds the entire account balance. This means your funds can flow efficiently across multiple positions, but also that losses can spread across positions. The advantage is that profits from one position can offset losses in another; the risk is that all positions’ risks are aggregated together.

Which to Choose

Scenarios suitable for Isolated Margin

• You want precise control over the maximum loss of each position
• Your trading style is cautious, preferring risk isolation
• Managing multiple independent trading strategies without interference

Scenarios suitable for Cross Margin

• You are confident in your trading judgment and can handle cross-position risks
• You prefer flexible fund allocation and want to maximize account capital efficiency
• When profitable positions can compensate for losing ones, making this mode advantageous

A simple criterion: Isolated margin sets a risk ceiling for each position; cross margin allows all positions to coexist in one pool. The former is more conservative, the latter more flexible. The choice depends on your risk preference and trading experience.