What is Cross Margin Mode

Isolated margin and cross margin are two margin modes available for futures trading. Users can select their preferred margin mode and leverage multiplier. The leverage multiplier affects the position margin in isolated margin mode and the initial margin in cross margin mode.

Isolated Margin Mode

In isolated margin mode, the position margin is a fixed value. It starts with the initial margin, and the margin amount can be changed by adjusting the leverage and adding more margin. When the margin balance is below the maintenance margin, forced liquidation is triggered. At this point, the position margin amount is the maximum loss the user will bear. Position Margin in Isolated Margin Mode = Position Size When Opening * Average Entry Price / Leverage Multiplier

Suppose you buy 0.1 BTC/USDT contracts at the price of 50,000 USDT, and the initial leverage multiplier is 25x, then the position margin in isolated margin mode is: 50,000 * 0.1 / 25 = 200 USDT. If your position is liquidated due to price fluctuations, you will only lose the 200 USDT margin for this position, without affecting other funds in the futures account.

Cross Margin Mode

In cross margin mode, the entire balance of your futures account is used as margin for your positions. Positions with the same settlement currency can share the total margin. For example, all USDT-margined cross margin contracts share the USDT margin. However, coin-margined contracts do not share margins between different cryptocurrencies. For instance, ETH cannot be used as margin for BTC coin-margined contracts. This means traders can maximize the use of their account funds without frequently transferring funds or closing positions.

Example:

In cross margin mode, suppose you buy 0.1 BTC/USDT contracts at the price of 50,000 USDT, the leverage multiplier is 25x, and the futures account balance is 1,000 USDT, then the initial margin for this position is: 50,000 * 0.1 / 25 = 200 USDT.

When the position makes a profit of 200 USDT, your account’s total margin will increase to 1,200 USDT. The extra 200 USDT can be used to open new positions without the need to close or withdraw funds as in isolated margin mode.

Conversely, if the position loses 200 USDT, the total margin in your account will decrease to 800 USDT. The available funds for opening new positions will also decrease accordingly.

Summary

Isolated margin and cross margin are two different modes. In isolated margin mode, the position margin is a fixed value, making it easier to understand. In cross margin mode, the position margin includes all funds in your futures account and any unrealized profits and losses. This maximizes the capital efficiency.

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