1. Full Margin Mode
In full margin mode, all available funds in the contract account are treated as available margin, and liquidation will only occur when the position loss exceeds the account balance.
Advantages:
The account has a strong capacity to bear losses, making it easier to operate and calculate positions, and is therefore often used for hedging and quantitative trading.
2. Isolated Margin Mode
In the isolated margin mode, users can hold positions in both directions, and the risks of short and long positions are calculated independently.
When a user’s position is liquidated, they only lose the margin of the position, meaning that the margin amount is the user's maximum loss.
When a user actively closes a position, the losses and profits generated by the short and long positions will be immediately settled into the corresponding position's margin.
Advantages:
If affected by price fluctuations, when a user’s position is liquidated, they will only lose the margin amount of that direction and will not affect other funds in that contract account.
For example:
A and B both use $2000 with 10x leverage to go long on the BTC/USDT contract.
A uses isolated margin mode, occupying $1000 in margin, while B uses full margin mode;
Assume A's liquidation price is $8000 and B's liquidation price is $7000;
If BTC suddenly drops to $8000, Account A loses $1000 in margin and is forced to liquidate, losing $1000 and leaving $1000 remaining.
While B uses full margin mode, after losing $1000, the long position remains. If the price rebounds, B might turn losses into profits; however, if the price continues to drop, they could lose the entire $2000.
The above content details whether beginners should choose full margin or isolated margin for contracts. Generally speaking, in terms of account fund usage, full margin mode uses all account funds as margin shared by multiple contract positions, while isolated margin mode calculates margin separately for each account, with profits and losses not affecting each other. It can be understood that full margin is like putting all eggs in one basket, while isolated margin spreads the eggs across multiple baskets.
