What it means
Cross-margin mode uses the entire account balance as shared margin across all open positions — losses can be absorbed by other position's profits, postponing liquidations. Isolated-margin mode allocates a fixed margin amount to each position; losses can only consume that allocation, after which the position is liquidated independent of the rest of the account. Cross is more capital-efficient (avoids unnecessary liquidations on temporary drawdowns). Isolated is safer (caps the maximum loss per position).
Why it matters
The choice between cross and isolated is a major risk-management decision. Cross-margin allows position survival through temporary drawdowns but exposes the entire account to a single catastrophic position. Isolated-margin protects the rest of the account but liquidates positions earlier. Most professional traders use isolated for high-risk trades (small notional, defined-risk) and cross for delta-neutral or hedged positions.
How to use it
Default to isolated for directional trades — defines maximum loss explicitly. Switch to cross for portfolio strategies where one position's profits should offset another's drawdown (e.g., basis trade, pairs trade). Never use cross-margin on single high-leverage positions — one bad trade can wipe the account.
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