Why Is “Isolated Margin” Considered Safer for Speculative, High-Leverage Trades?
Isolated margin is safer because it limits the maximum potential loss to only the margin dedicated to that specific trade. By ring-fencing the collateral, a catastrophic loss on one speculative position cannot affect the capital allocated to other positions or the trader's entire account balance.
This compartmentalizes the risk.
Glossar
Maximum Potential Loss
Exposure ⎊ Maximum Potential Loss (MPL) within cryptocurrency, options trading, and financial derivatives represents the theoretical worst-case financial detriment an investor could incur from a specific position or portfolio.
Speculative Position
Position ⎊ A Speculative Position is a trade established with the explicit intent of profiting from an anticipated price movement in a cryptocurrency or its derivative, rather than for hedging or arbitrage purposes.