When conducting margin/leverage trading on most centralized exchanges such as Binance, OKX and Bybit, users You can choose between two different margin trading methods: "Cross Margin" and "Isolated". There are differences between the two methods in terms of position independence, risk control and applicable scenarios.

Cross position

Cross position means that all funds in the account can be used as margin to support multiple positions. trade. This means that in this trading mode, no matter how many positions you hold, all of your funds will be shared among these positions.

Suppose one of the multiple positions you hold suffers a loss and is about to be liquidated, but because it is in cross position mode, your account is not used as a margin. The funds and the realized profits of the remaining positions (some exchanges allow this) can be used to make up for this part of the loss, thereby preventing the position from being liquidated. This is also the advantage of a full position, that is, in some cases, a full position can protect your position from liquidation.

What is liquidation/closing? Please refer to the entry "What is Liquidation".

But correspondingly, if a position suffers a serious loss and exhausts all the funds in the account but the margin balance is still insufficient, forced liquidation will still be triggered, causing all positions to be closed. Being liquidated.

Therefore, the cross-margin model is more suitable for long-term positions and investment strategies that maintain positions under short-term fluctuations, that is, it is more suitable for assets with relatively less volatility and more sufficient liquidity.

Isolated position

Compared with cross position, isolated position allows you to spread your funds into different independent positions , that is, a certain part of the funds is locked in a specific position as a margin. This means that you can diversify your investments into multiple positions, and each position is independent of each other and does not interfere with each other.

The advantage of isolated positions is that even if a single position of yours suffers a loss and is liquidated, the funds in other positions and accounts will not be affected. Based on this feature, isolated positions can provide certain risk control. You can limit the amount of margin for each position to reduce the overall risk.

For example

Suppose you have 500 USDT in each of your cross margin and isolated margin accounts, and you open an account with 200 USDT in each account. For long positions in BTC and ETH, the remaining 100 USDT is stored in the corresponding account as reserve funds. Your position situation at this time:

If the prices of both BTC and ETH are rising, then everyone is happy and both of your accounts will bring you some profits. And if the price of BTC rises, but the price of ETH falls, it will have different impacts on the two accounts:

• For the isolated account, when ETH When the price drops, the margin of the ETH position (200 USDT) will be consumed. If the margin is exhausted and you do not replenish the margin in time, the position will be forced to be liquidated, but your BTC position and the remaining 100 USDT in your account will not be affected in any way. Influence.
• For cross-margin accounts, when ETH drops to the liquidation price, liquidation will not be triggered immediately. Even if you do not choose to replenish margin, the system will automatically close your position. The remaining funds in the account and the realized profits in the BTC position are replenished to the ETH position to maintain the position. And if ETH continues to fall, or even more extreme, the price of ETH directly returns to zero, then your BTC position will also be liquidated, and there will be no funds left in your account.

Therefore, when the price drops, the isolated account will allow you to lose at most all the margin of the corresponding position, that is, at most 100% of the initial margin. A cross position account may cause you to lose more than your initial margin. Although the risk of liquidation is smaller, liquidation often means greater losses.

It is worth noting that different exchanges may have different rules and mechanisms for handling liquidation in cross-position mode: under the rules of some exchanges, when a position triggers liquidation, the exchange will automatically Perform a forced liquidation operation and all positions will be closed. This means that even if other positions are still profitable, they will be forced to be liquidated; on some exchanges, when a position triggers liquidation, the position will be forced to close, but other positions can continue to remain open. Additionally, some exchanges such as Binance and BitMEX allow you to use the realized profits of other positions as margin to keep the remaining positions open.

In summary, when choosing an exchange and conducting cross and isolated trading, be sure to carefully read and understand the exchange's rules and policies, and ensure that appropriate risk management strategies are followed to protect the safety of funds.

To summarize

Full position

• Margin is used to support multiple positions
• Liquidation risk is relatively small, and all funds may be lost in extreme market conditions

Isolated position

• Margin is used to support a single position
• The liquidation of a single position will not affect other positions and the remaining funds in the account