There are also two types of margins for leveraged operations: cross-margins and isolated margins. Learning these terms is relatively simple, but it is an essential element for copy trading!
The amount a trader uses for a position is called "margin". The margin multiplied by the leverage effect then constitutes the size of the position. For example, a trader opens a short position with 10,000 euros and a leverage of 10x. The size of the position is then 100,000 euros and the margin is 10,000 euros.
With the isolated margin, the trader can lose as much as possible the margin he has assigned to a position. If we take the above example, the maximum loss is 10,000 euros if the price increases by 10%. His position will then be liquidated.
On the other hand, in the event of a cross-margin, a trader may lose his entire account. Suppose that a trader has an account of 100,000 euros and opens a short position on cross-margin. The leverage effect is 10x and the margin is 1,000 euros. The size of the position is therefore 10,000 euros.
If the price of the tracked cryptocurrency increases by more than 10%, the position is NOT liquidated. Instead, the account will instead be debited for an unrealized loss.
If the price of the covered cryptocurrency increases by 100%, the loss is 10 (levy)10,000 euros100% = 100,000 euros = 100,000 euros. The trader's account is then liquidated.
