Isolated margin mode and cross margin mode are two common margin modes in Futures Trading. These two modes have distinct characteristics and are suitable for different scenarios.
1. What is isolated margin mode?
In isolated margin mode, a certain amount of margin is allocated to a single position so the risk is segregated from other positions. In the event of forced liquidation, the trading user will only lose the entire margin of that position. Users can manually or automatically add margin to reduce the risk of liquidation for a single position in isolated margin mode.
Example:
User A has 1,000 USDT in the Perpetual Futures Account. User A selects isolated margin mode and uses 100 USDT as margin with 10x leverage to open a 1,000 USDT position. If the market fluctuates greatly, resulting in the position to be liquidated, only 100 USDT will be lost (excluding fees).
2. What is cross margin mode?
In the cross margin mode, all positions of a particular asset share the same margin. In the event of forced liquidation, the trading user may lose the entire margin of that particular asset and all positions sharing the same margin.
Example:
User A has 1,000 USDT in the Perpetual Futures Account. User A selects cross margin mode to open a futures position. Since the entire account balance is used as margin, User A will lose 1,000 USDT if liquidation occurs.
3. Can I switch between cross margin mode and isolated margin mode for an open position?
You cannot switch between cross margin mode and isolated margin mode for an open position or a pending order.
4. Does adjusting the leverage in cross margin mode affects the forced liquidation price of the position?
In cross margin mode, adjusting the leverage does not affect the user's balance, position value, or entry price. It only results in an increase or decrease in the position and order margin, which won't affect the liquidation price of the position.