What Is the Difference between a ‘Cross Margin’ and an ‘Isolated Margin’ Account?
In an isolated margin account, the margin allocated to a specific position is separate from the rest of the account balance. If the position is liquidated, only that margin is lost.
In a cross margin account, the entire account balance is used as collateral for all open positions. This reduces the chance of liquidation for a single position but risks the entire account balance if multiple positions move adversely.
Glossar
Account Balance
Valuation ⎊ Account balance, within cryptocurrency, options, and derivatives, represents the net liquid value accessible to a participant, factoring in realized and unrealized profit and loss across open positions and collateral held.
Isolated Margin
Leverage ⎊ Isolated margin represents a risk management protocol within cryptocurrency derivatives exchanges, enabling traders to allocate specific capital for margin requirements on a per-contract basis.
Isolated Margin Account
Risk ⎊ Isolated Margin Accounts represent a segregated funding pool within a derivatives exchange, specifically allocated to positions in perpetual swaps or futures contracts; this compartmentalization limits potential losses to only the funds within that isolated account, preventing liquidation cascades across a trader’s broader portfolio.
Entire Account Balance
Valuation ⎊ The Entire Account Balance, within cryptocurrency, options, and derivatives, represents the aggregate net equity held by a participant across all positions and cash holdings, reflecting real-time market valuations and accrued fees.