How Does Cross Margin Affect the Liquidation Price of a Position?
Cross margin generally lowers the liquidation price of a position compared to isolated margin. This is because the entire account balance acts as a larger margin pool, providing a greater buffer against losses.
The position can withstand a larger adverse price movement before the total account equity drops to the maintenance margin level.
Glossar
Liquidation Price
Trigger ⎊ The Liquidation Price is the specific market price level at which a trader's margin equity falls to the maintenance margin threshold, causing the exchange or protocol to automatically close the leveraged position to prevent the account balance from falling into negative territory.
Adverse Price Movement
Exposure ⎊ Adverse price movement within cryptocurrency derivatives represents a deviation from anticipated directional forecasts, impacting portfolio valuations and risk parameters.
Funding Rate Calculation
Formula ⎊ Periodic payments between long and short positions ensure that the perpetual swap price remains closely aligned with the underlying spot index.
Maintenance Margin
Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.
Account Balance
Holding ⎊ An account balance represents the aggregate value of a trader's assets and liabilities held within a specific platform or exchange.
Account Equity
Balance ⎊ Account equity represents the total capital an investor holds within a trading account, encompassing both settled funds and the current market value of all open positions.