Margin modes and liquidation

Margin modes decide how much of your balance backs a leveraged position: isolated margin ring-fences a set amount for one trade, while cross margin lets all positions draw on your whole futures balance. Liquidation is the forced closing of a position when its margin can no longer cover losses.

Isolated margin

With isolated margin you assign a fixed amount to a single position. If that trade goes badly, the most you lose from it is that allocated margin (plus fees). Other funds in your account are not touched automatically.

Cross margin

With cross margin, your entire available futures balance supports every open position. A losing trade can borrow from your spare balance to avoid liquidation for longer. That sounds helpful, but it also means one bad trade can drain the whole account instead of just its own slice.

Maintenance margin and liquidation

Exchanges set a maintenance margin, a minimum amount of equity a position must keep. When losses push your equity below it, the exchange's liquidation engine closes the position, usually based on the mark price. Liquidation often comes with an extra fee.

At 20x leverage, the same maths puts liquidation after a fall of less than 5%. Crypto prices can move that much within hours.

Reducing liquidation risk

• Use lower leverage, which pushes the liquidation price further away.
• Prefer isolated margin while learning, so one mistake cannot empty your account.
• Set a stop order that exits well before the liquidation price.
• Check the liquidation price the exchange displays before confirming any order.

Key takeaways

• Isolated margin limits a position's risk to its assigned margin.
• Cross margin shares your whole balance, so losses can spread.
• Liquidation triggers when equity falls below the maintenance margin.
• Higher leverage moves the liquidation price closer to your entry.