Cross Margin

Two Margin Management Modes: Cross and Isolated

In futures margin trading, there are two main risk management modes: cross margin and isolated margin. The choice between them determines how your collateral is used to secure your positions and how risk is managed.

Currently, our platform operates in cross margin mode. In this mode, the entire balance of your futures account, including all assets, acts as a collateral pool for all your open positions. The core principle of cross margin is that unrealized profit (Unrealized P&L) from one "green" position is automatically used to cover unrealized losses from another. This offsetting mechanism helps prevent the premature liquidation of individual losing positions, as long as there is enough total capital in the account to support all open trades.

Isolated margin, which we plan to introduce in the near future, offers a different approach. In this mode, you allocate a specific, "isolated" amount of margin for each individual position. The risk for each trade is then strictly limited to the amount you have allocated to it and does not affect the rest of your account balance. This allows for more granular risk control over each separate trade.

Advantages and Disadvantages of Cross Margin

Advantages:

Flexibility and Resilience to Volatility: Cross margin significantly reduces the likelihood of liquidating individual positions due to short-term market fluctuations. This makes it an ideal tool for implementing hedging strategies and holding positions long-term.

Optimized Capital Use: Since you do not need to allocate separate collateral for each trade, traders can use their available funds more efficiently, distributing capital across various trading ideas.

Disadvantages:

Increased Risk to the Entire Account: The main drawback of cross margin is that in the event of a strong and simultaneous adverse market movement across several or all positions, the entire account balance is at risk. A single large losing position can drain all the collateral and lead to the liquidation of the entire portfolio.

Practical Example of Offsetting in Cross Margin

Let's imagine a trader has 10,000 USDT in their futures account. They decide to implement two strategies at the same time:

1. Open a LONG position on BTC/USDT.

2. Open a SHORT position on ETH/USDT.

After some time, the market situation changes:

• The price of BTC falls, creating an unrealized loss of -500 USDT on the LONG position.

• Simultaneously, the price of ETH also falls, which is a favorable outcome for the SHORT position and creates an unrealized profit of +800 USDT.

In a cross margin system, the profit from the ETH position (+800 USDT) automatically offsets the loss on the BTC position (-500 USDT). The total unrealized P&L of the account becomes positive (+300 USDT). Thanks to this offsetting mechanism, both positions remain open and are far from the liquidation threshold, which demonstrates the primary strength of cross margin.

The choice of margin mode fundamentally defines a trading strategy. Since our platform exclusively offers cross margin, it is inherently best suited for traders who apply a portfolio approach to risk management, rather than for those who prefer to make isolated, high-risk "bets" on individual assets.