1. What is isolated margin?
Isolated margin refers to the allocation of a certain amount of margin to the position. If the position margin loss falls below the maintenance margin level, the position will be liquidated. Under the Isolated margin mode, users can increase and decrease the margin for the position.
For example, user A’s standard contract account has 20 XRP, and the user chooses the isolated margin to open 10 XRP/USD contracts with a leverage of 10 times. The margin occupied is 3.97 XRP, but after opening the position, XRP does not rise but falls. If the position risk reaches 100% and the position margin is lower than the maintenance margin, the position will be forced to liquidate. User A will only lose 3.97 XRP, and the rest of the XRP in the account will not be affected.
Since the capital risk can be divided, the isolated margin is more flexible, but in the case of higher volatility and higher leverage, the isolated margin mode has a lower ability to resist risks. Isolated margin is more suitable for novice users and can limit the loss within a range.
2. Cross margin
Cross margin is to treat all available assets in the account as available margin to prevent positions from being liquidated. In case of liquidation, users may lose all margin and positions.
Let’s take user A as an example again. The standard contract account has 20 XRP, the user chooses 10 times leverage to open 10 XRP/USD contracts, and the occupied margin is 3.97XRP. If the cross mode is implemented, all 20 XRP in the account will be used as a margin. If the position risk reaches 100% and the position margin is lower than the maintenance margin, the position will be liquidated, and the user will lose all assets in the account.
The advantage of cross margin is that as long as the leverage is not too high, the ability to resist risks is strong, the account has a strong ability to carry losses, and it is easy to operate and calculate positions, so it is often used for hedging and quantitative trading.