Learn / Risk & Position Sizing
Isolated vs cross margin
Isolated margin allocates a fixed amount to one position; if it is exhausted, that position is liquidated and nothing else is touched. Cross margin backs every position with your whole balance, which pushes each liquidation price further away and makes every position capable of liquidating the others.
Neither is safer. They relocate the risk, and the choice is about which failure you would rather have.
Short answer
- One position, defined maximum loss, you want the stop to be the thing that closes you → isolated.
- Genuinely hedged positions where one gains as the other loses → cross, and this is the case where it is clearly correct.
- Several independent positions and an account you would rather not lose all at once → isolated, or cross with position caps that actually bind.
- You are not sure → isolated, because its failure is bounded and comprehensible.
What each does
Isolated. You post margin to a position. That margin is all it has. As price moves against you it is consumed, and when it falls to the maintenance requirement the position is liquidated. Your loss is capped at the margin posted. The rest of the account is untouched.
Cross. All positions share the account balance as collateral. A position moving against you draws on the whole balance, so it can absorb a much larger adverse move before liquidation. The cost is that the balance is finite and shared: a large enough loss on one position eats the collateral supporting the others, and they liquidate too.
The trade-off, stated plainly
| Isolated | Cross | |
|---|---|---|
| Maximum loss per position | The margin posted | Potentially the account |
| Liquidation distance | Nearer | Further |
| Positions coupled | No | Yes |
| Failure mode | One position closed early | Several closed at once |
| Easy to reason about | Yes | Not really |
The liquidation price calculator computes the isolated case, because it is the one with a self-contained answer. Cross liquidation depends on every other position you hold and their unrealised PnL, so there is no formula that takes four inputs and returns the number.
That difficulty is itself information. If you cannot easily compute where you get liquidated, you are carrying a risk you cannot size.
Why “further liquidation” is not automatically better
The appeal of cross is obvious: more room, fewer liquidations from ordinary noise. And for a single position with the same nominal leverage, it genuinely is further away.
The problem is what is funding that extra room. Cross does not create margin — it borrows it from every other position’s safety. A position that would have liquidated at −20% under isolated might survive to −45% under cross, and the difference was paid for by the rest of the account.
If it recovers, you were right to hold. If it does not, you lost 45% of the account instead of the margin you allocated, and the positions you were not worried about went with it.
Cross margin converts a bounded loss into an unbounded one in exchange for a lower probability of taking it. Whether that is a good trade depends on how confident you are, which is exactly the thing people are worst at judging while a position is underwater.
When cross is the right answer
Genuine hedges. If you are long one instrument and short a correlated one, their PnL offsets. Under isolated margin, each position is evaluated alone, and the losing leg can be liquidated while the winning leg sits there — destroying the hedge at the worst moment. Cross margin nets them, which is the arrangement the strategy requires.
This is the clear case, and it is narrower than it sounds: the positions have to actually offset, not merely be in the same asset class.
Multi-leg structures where the legs are one position in substance.
Outside these, the case for cross is mostly “I do not want to be liquidated”, which is a preference about frequency rather than about total exposure.
What both leave out
Neither mode changes two things that move the real liquidation level closer than any calculator suggests:
- Fees come out of margin on entry and exit.
- Funding accrues continuously on perpetual positions and is deducted from margin. A position held across many settlements is progressively less collateralised — see the funding rate calculator.
And maintenance margin is tiered: the rate rises with position size, so a large position liquidates earlier than the rate you looked up. All three errors point the same way.
The interaction with stops
Under isolated margin, the question from the leverage and stop-loss table applies directly: if liquidation sits inside your stop distance, the stop is decorative and your loss is the margin rather than the amount you sized for.
Cross margin appears to solve this by moving liquidation away. It does so by making the loss, when it comes, larger than the one you planned. Neither mode fixes an oversized position — the fix for that is a smaller position, which is what the position size calculator is for.
FAQ
Which is safer, isolated or cross margin?
Neither, and the framing hides the real choice. Isolated caps what any single position can cost you and liquidates it sooner; cross reduces how often you are liquidated and raises what it costs when you are. If you want a bounded, predictable maximum loss per position, isolated gives you that. If you want more room to be wrong temporarily, cross gives you that at the price of coupling every position together.
Why is my cross margin liquidation price different from what a calculator says?
Because cross liquidation depends on your entire account: every other position, their unrealised PnL, and the total maintenance requirement across all of them. A calculator taking entry, leverage and maintenance margin can only compute the isolated case. For cross, use the number your venue displays and re-check it as your other positions move.
Should I use cross margin for a hedge?
Usually yes — this is the case where cross is clearly correct. Under isolated margin each leg is evaluated separately, so the losing leg can be liquidated while the winning leg remains, which removes the hedge precisely when it was working. Cross nets the legs, which is what a hedge requires.
Does cross margin reduce my risk of liquidation?
It reduces the probability of any individual liquidation and increases the consequence of one. The extra room comes from collateral supporting your other positions, so a loss large enough to exhaust it takes them too. Fewer events, larger events.