Comparison of Cross Margin Mode and Isolated Margin Mode

Key Words: Isolated Margin Mode, Cross Margin Mode.

• Description of Two Position Modes

• Isolated Margin Mode
  In isolated margin mode, each trade's margin is independent of the other. After the margin of a single trade has a loss that reaches the liquidation level, there will be forced liquidation.
  
  

• Cross Margin Mode
  In cross margin mode, the margin of all orders and the remaining funds in the account will be shared. This means that each trade can lose more than the margin of that specific trade. When continuous losses lead to the account reaching the liquidation level, all trades will be forced to close at the same time, and you will lose all account funds.
  
  

• Calculation in Isolated Margin Mode

• Funding Rate

• Funding fees are charged/rewarded for settlement of orders held for more than 1 hour.
• When the funding rate is positive, it means that the direction of the position needs to be charged for funding fee; When the funding rate is negative, it means that you can get a fee reward.
• Calculation Method: Funding Fee = Total Contract Trade Size * Funding Rate.
• Funding occurs every 8 hours at 0:00, 8:00 and 16:00 ( GMT+8 ).
• Funding Rate/Fee will be settled when closing a position.
  
  

• Estimated Forced-Liquidation Price
  Direction of order: 1 for long order；-1 for short order.
  

  Coin-Margin: Estimated Forced-Liquidation Price =Direction * Trade Size * Opening Price * (0.9 * Margin + Direction * Trade Size)

  USDT-Margin: Estimated Forced-Liquidation Price = Opening Price * [1 - (0.9 / Leverage) * Direction]

• Unrealized P&L
  Take USDT margin trading as an example:

         Unrealized P&L Ratio = Direction * Trade Size *(Closing Price - Opening Price)/ (Opening Price * Margin)

         Unrealized P&L = Unrealized P&L Ratio * Margin

• Calculation in Cross Margin Mode

• Unrealized P&L
  Unrealized P&L refers to the estimated profit and loss of all open positions, also known as floating P&L.

• Net Value
  The net value of the account assets after unrealized P&L are calculated.
  Ideally, after closing all positions, the account funds equal to the net value before positions are closed. For example, 100 USDT was transferred to an account, and two positions were opened. At this time, the unrealized profit is 5 USDT. The net value is 105 USDT.

• Position Margin
  The sum of the initial margin of all orders. For example, two positions are opened. The principal of one position is 10 USDT and the other is 5 USDT. Then the position margin is 15 USDT.

• Free Margin
  This is the amount of margin that can be used to open an order. Note that in the Cross Margin mode, the unrealized P&L will directly affect the "free margin". As the unrealized profit increases, the free margin also increases, and as the unrealized loss increases, the free margin decreases. Therefore, in the Cross Margin mode, profit orders can offset other loss orders. Meanwhile, the floating profit can be used to open positions to improve fund efficiency.
  
  Calculation Method:
  Free Margin = Net Value – Position Margin (Min. value = 0)
  
  For example: 100 USDT was transferred to an account, and two positions were opened. At this time, the unrealized profit was 5 USDT. The net value is 105 USDT. The position margin is 15 USDT. The free margin is 90 USDT. Assuming that the unrealized profit becomes 55 USDT, and the net value becomes 155 USDT. The free margin becomes 140 USDT accordingly.

• Margin Rate
  The most critical indicator to measure account risk.
  When the margin rate falls to 0%, the account will trigger a forced liquidation, which is the only basis for the forced liquidation of the account. The higher the margin rate, the lower the risk, and vice versa.
  
  Calculation method:
  Margin Rate = Net Value / Position Margin - Adjustment Factor
  The adjustment factor is to prevent position overruns, which is currently set at 10%.
  
  For example: The net value is 150 USDT and the position margin is 15 USDT. The margin rate is 150/15-10% = 990%. When there is 1.5 USDT net value remaining, 1.5 / 15-10% = 0, which will trigger the forced liquidation.

• Funding Rate

• Funding fees are charged/rewarded for settlement of orders held for more than 1 hour.

• When the funding rate is positive, it means that the direction of the position needs to be charged for funding fee; When the funding rate is negative, it means that you can get a fee reward.

• Calculation Method: Funding Fee = Total Contract Trade Size * Funding Rate.

• Funding occurs every 8 hours at 0:00, 8:00 and 16:00 ( GMT+8 ).

• Funding Rate/Fee will be settled at the funding occurring time. (Different from the Isolated Margin mode）

• Estimated Forced-Liquidation Price
  For calculation purposes, the principal is marked as A, the leverage B, the opening price C, and the direction of order K (K = 1 for Long , K = -1 for short); KAB/C is marked as J.
  KAB for each order is marked as L; the P&L of each trading pair as P(btc), P(eth), P(ltc),...P(trx).
  Mark liquidation price as Liq. ; For example, Liq. (btc) is the estimated liquidation price of the BTC trading pair.
  
  Liq. (btc) = [Position Margin * Adjustment Factor - Net Value + P(btc)+(L1+L2+ …… +Ln)] ÷(J1+J2+ …… +Jn)
  
  Notes:

1. L1, L2, J1, J2 are of BTC orders.
2. The result of the calculation may be meaningless (e.g., denominator is 0) / negative/ positive to infinity.
3. When the result is meaningless/negative/＞ 1,000 K, it will be displayed as --.