How Does Cross-Margin Differ from Isolated Margin in Managing Liquidation Risk?
Isolated margin confines the risk to a single position; only the specific margin allocated to that trade is at risk of liquidation. If that margin is lost, the position is closed, but the rest of the funds in the trader's account are unaffected.
Cross-margin, on the other hand, uses the entire available balance in an account as collateral for all open positions. This allows profits from one position to cover losses from another, potentially preventing liquidation.
However, it also means that if liquidation does occur, the trader could lose their entire account balance, not just the margin for one trade.
