Isolated vs Cross Margin: Which One to Choose
Before opening a futures position, the exchange asks which margin mode you want to use. The choice looks technical, but it completely changes how big a loss can be.
Isolated margin
With isolated margin, you set aside a specific amount for that position. If the price moves against you and the margin runs out, the position is liquidated and you lose only that amount. The rest of your account balance stays protected.
Advantage: the maximum risk is known in advance. Drawback: the position can be liquidated sooner, because it only has its own margin to rely on.
Cross margin
With cross margin, the entire available balance of the account acts as a cushion for all open positions. The position can withstand bigger moves, but if everything goes wrong, you can lose the whole balance.
Advantage: less risk of a quick liquidation. Drawback: one bad position can consume the money that was backing the others.
Comparison
| Isolated | Cross | |
|---|---|---|
| Maximum loss | The position's margin | The account balance |
| Liquidation | Closer | Further away |
| Risk control | High | Lower |
| Best suited for | Beginners and arbitrage | People who monitor closely |
Which to use in funding arbitrage
In funding arbitrage, each leg has its own liquidation price. Using isolated margin makes it clear how much you are risking on each exchange and keeps a struggling leg from dragging down the balance of the other.
It's the mode Multi Arbitrage uses in Funding Day Trade and Funding Scalp trades, together with the three-layer protection. Even so, it's worth checking in your exchange dashboard which mode is active on each coin.
An example to make the difference stick
You have $1,000 in your account and open a $500 position with 10x leverage, which uses $50 of margin. With isolated margin, if the price moves against you and the position is liquidated, you lose the $50. With cross margin, the exchange uses the other $950 as a cushion, and the position withstands a bigger move, but at the limit you can lose far more than $50.
Practical tips
- Check the margin mode of each coin before opening, since some exchanges keep a mode per coin.
- Note the leverage you chose: on many exchanges it is set per coin.
- With isolated margin, keep an eye on the margin: some exchanges let you add margin to push liquidation further away.
- Avoid mixing experimental trades with arbitrage trades in the same cross-margin wallet.
Related guide: how to avoid liquidation. See also all the crypto arbitrage guides.
Frequently asked questions
Can I change the margin mode with a position open?
It depends on the exchange. On many, you can't switch with an open position on the same coin. Set it before entering.
Does isolated margin prevent liquidation?
No. It limits the loss to the position's margin, but the position can still be liquidated if the price reaches the liquidation level.
Does Multi Arbitrage change the margin mode on its own?
The bot sets isolated margin and the configured leverage when opening positions on the exchanges where that is possible. Check it in your exchange dashboard on the first trade.
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This content is for information only and is not investment advice. Trading crypto derivatives involves a high risk, including the total loss of your capital. Past results do not guarantee future results, and the figures mentioned are examples. Before trading, check whether trading crypto derivatives is allowed in your country and what your tax obligations are. Assess whether the product suits your profile before investing.