Isolated Margin
Isolated margin is a margin mode where a specific amount of collateral is assigned to one leveraged position and the risk is largely separated from the rest of the trading account.
✦ Key Insight
Isolated margin helps traders limit how much account capital is exposed to one position. If a trade performs badly, the exchange generally uses the margin allocated to that position rather than automatically drawing on the entire eligible account balance. This makes isolated margin useful for defined-risk position management.
✕ Common Misconceptions
Confusing isolated margin with low leverage
Assuming losses can never exceed expectations
Adding margin repeatedly without reassessing the trade
Forgetting funding fees
Ignoring liquidation price changes
Confusing isolated with cross margin
Detailed Explanation
How It Works
Suppose a trader has $10,000 in a derivatives account but allocates only $1,000 of isolated margin to an ETH position.
If the position moves heavily against the trader, the $1,000 allocated to that trade is the primary collateral supporting it.
Adding more isolated margin can move the liquidation point farther away, while removing margin can bring it closer.
The exact mechanics depend on the exchange.
FAQs
Is isolated margin safer than cross margin?
It can limit how much collateral is exposed to one position, but the trade itself can still be highly risky.
Can I add margin later?
Many platforms allow this.
Does isolated margin prevent liquidation?
No.
In Practice
Dig Deeper
Cross Margin
Margin mode where all account balance and unrealized profits/losses are shared as collateral across all open positions.
Liquidation
Liquidation occurs when a leveraged trading platform forcibly reduces or closes a position because the trader no longer has enough margin to satisfy the required maintenance margin.