What Is the Difference between Cross Margin and Isolated Margin in Perpetual Swap Trading?
Isolated margin dedicates a specific amount of collateral to a single position, isolating the risk; if the margin is lost, only that position is liquidated. Cross margin uses the entire account balance as collateral for all open positions.
This spreads the risk but exposes the entire balance to liquidation if the combined losses are too large.
Glossar
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.
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.
Perpetual Swap
Mechanism ⎊ Perpetual swaps, within cryptocurrency markets, represent agreements to exchange cash flows based on the difference between a cryptocurrency’s current price and a user-defined price, perpetually, without an expiration date.
Cross Margin
Leverage ⎊ Cross margin, within cryptocurrency derivatives and options trading, fundamentally involves utilizing a single margin pool to collateralize positions across multiple instruments.
Effective Transaction Cost
Cost ⎊ Effective Transaction Cost, within the context of cryptocurrency, options trading, and financial derivatives, represents the aggregate expenses incurred beyond the nominal price of an asset during its acquisition or disposal.