There are two main different kinds of margin, cross margin and isolated margin. In this post we'll explain both and show you how they can be used to manage your risk.
Cross margin is often used by traders to reduce their liquidation risks. This is done because cross margin enables you to use all available margin on your account to support your open (losing) position.
This includes all margin available from your realised PNL. Cross margin is often preferred during very volatile times and for long-term trades.
Unrealised PNL cannot be used for cross margin.
Isolated margin is the balance you enable for a single position. Traders use isolated margin to restrict the amount of margin used on a single position to manage their risks.
In case of liquidation, only the allocated margin will be liquidated, instead of the full account balance. Liquidations can be prevented by adjusting the isolated margin, by adding margin to the open position.
Cross Margin vs Isolated Margin
As explained above, cross margin is typically the best option to reduce the risk of being liquidated. This is due to the heavily volatile times Bitcoin offers. Therefore, we have set your margin on cross margin by default.
Isolated margin might be interesting for more experienced traders who like to be flexible. Traders can use this margin option to limit their exposure, it would however be necessary to monitor it closely to add margin in case a position is about to get liquidated.