Cross margin is a trading mode in cryptocurrency trading that uses your entire available balance in your account as collateral to keep your positions open.
It is mainly used in futures markets and margin trading (trading with leverage).
Let me explain it simply:
How does cross margin work?
You share the balance as collateral:
The entire balance of your margin or futures account is used to cover potential losses of a position.
For example, if you open a trade in Bitcoin (BTC) with cross margin, the full balance of your account will be available to prevent the position from being liquidated (closed due to lack of funds).
Reduction of immediate liquidation risk:
If your trade starts to generate losses, the system uses the rest of your available balance to prevent you from losing the entire position quickly.
This gives you more time to adjust your trade or close the position before being liquidated.
You share risk among positions:
If you have several open positions with cross margin, they all share the same balance as collateral. If one position has large losses, it can affect the others.
What differentiates it from isolated margin?
Cross margin:
Your entire balance is available to back your positions.
Reduces the risk of immediate liquidation, but you can lose your entire balance if the losses are large.
Isolated margin:
Only a specific amount of your balance is allocated to a position.
If that position reaches maximum losses, you only lose the allocated balance, without affecting the rest of your account.
Advantages of cross margin
Greater flexibility:
If you have multiple open positions, you can manage losses with the overall balance instead of relying on a fixed amount.
Lower immediate liquidation risk:
As your entire balance is available, it is less likely that your position will be closed due to lack of funds in the short term.
Disadvantages of cross margin
Total loss risk:
If the losses from your positions are too large, you could lose your entire account balance.
Less control:
If you do not manage your positions well, the losses from one trade can affect the performance of others.
Practical example:
Cross margin:
You have 1,000 USDT in your account and open a position with 500 USDT.
If that position starts to lose, the system will use the remaining 500 USDT as collateral to avoid liquidation.
If the losses exceed 1,000 USDT, you lose your entire balance.
Isolated margin:
With the same 1,000 USDT, you decide to allocate only 500 USDT to one position.
If that position loses the 500 USDT, the trade closes automatically, but you still keep the other 500 USDT.
When to use cross margin?
It is useful if you have experience and want to reduce the risk of quick liquidations.
However, if you prefer to limit your losses and have more control, isolated margin is usually better.
Conclusion:
Cross margin can be a powerful tool for experienced traders, as it maximizes the collateral available for trades.
But it involves a greater risk of losing your entire balance if you do not manage your positions correctly.
If you are a beginner, rest assured that it is a way to go straight to bankruptcy quickly.
If you still want to start trading, it is better to begin with isolated margin to minimize risks.
