Isolated Margin

Understanding Isolated Margin

This mode is useful for traders who want to take speculative positions where there is a possibility of their speculation turning out to be incorrect.

In such a situation, the user will be better protected compared to cross-margin mode because only their isolated margin balance will face liquidation instead of their entire margin balance.

The downside of using isolated margin is that your exposure will be limited to one position in a particular market.

Tailoring Risk Management for Diverse Portfolios

Isolated margin is also particularly useful for users who maintain diverse portfolios consisting of positions with varying levels of risk.

Unlike cross-margin mode, which spreads a user’s full funds across different positions, isolated margin mode prevents the risk of liquidation across multiple positions.

This is achieved by creating independent margins (or separate wallets) for each position.

Platforms typically allow users to adjust the margin allocated for each of their positions and make ongoing adjustments to margins.