How Does “Cross-Margin” Differ from “Isolated Margin” in a CEX?
Isolated margin dedicates a specific, limited amount of collateral to a single trading position. If the loss exceeds this margin, only that position is liquidated, protecting other funds.
Cross-margin uses the entire balance of the margin account as collateral for all open positions. This spreads the risk but also means a single losing position can deplete the entire account, leading to a full account liquidation.
Glossar
Margin Account
Leverage ⎊ A margin account in cryptocurrency, options, and derivatives trading represents an equity-backed loan from a broker, enabling traders to control a larger position than their available capital would otherwise permit.
Using Isolated Margin
Strategy ⎊ Using Isolated Margin is a deliberate risk management strategy where a trader explicitly designates a specific, finite amount of capital as collateral for an individual leveraged position.