What is isolated margin?

A margin mode that ring-fences a fixed amount of collateral to one position, capping the loss at the amount assigned.

If the position moves against you, only the isolated collateral is at risk and the rest of the account is untouched. The tradeoff is that the position liquidates sooner, because it cannot borrow support from your other holdings.

Traders often use isolated margin for a speculative position they are willing to lose in full, and cross margin for a hedged core book. Adding margin to an isolated position mid-trade pushes the liquidation price further away, which is the one lever available once a trade is on.

How it works

Every margined position needs collateral backing it. The margin mode decides which collateral counts.

Under isolated margin you assign a specific amount when you open. The exchange computes maintenance requirements and the liquidation price against that amount alone. If the position is liquidated, the assigned collateral is consumed and nothing else in the account is touched.

Under cross margin, the account's entire available balance backs every position. The liquidation price sits much further away, because there is more equity absorbing the loss, and a position can survive a move that would have ended it in isolated mode. The cost is that a single bad position can consume the balance supporting everything else.

Two operational details matter. Adding collateral to an isolated position is possible at any time and immediately moves the liquidation price, which is why exchanges show an add margin control next to the position. And switching modes on an open position is restricted on most venues, often prohibited outright, so the choice is effectively made at entry.

Choosing isolated mode does not reduce risk in total. It converts an uncertain loss into a known maximum, at the price of making that maximum more likely to be reached.

Example

Illustrative arithmetic. Your account holds $5,000. You open a $10,000 notional long and assign $500 to it under isolated margin. The maintenance requirement is 1 percent of notional, which is $100.

Your equity on that position is the $500 assigned plus or minus the running profit. Liquidation triggers when equity falls to $100, so you can absorb $400 of loss, which is a 4 percent adverse move on $10,000 of notional. Past that you lose the $500 and nothing more.

Run the identical position under cross margin and the full $5,000 backs it. Equity now falls to $100 only after $4,900 of loss, a 49 percent adverse move, so the position survives more than twelve times the distance. If the market does fall that far, the loss comes out of the entire $5,000 rather than the $500 you were prepared to risk.

Why it matters when you buy

Leveraged trading is restricted or unavailable to retail customers in many jurisdictions, and a spot purchase involves no margin mode at all. Check what is permitted where you live on the jurisdiction pages, and see the fee comparison for the cost of a straightforward purchase, which is the relevant number for most buyers.

Related terms

• cross margin: the whole balance backing every position
• margin: the collateral behind a borrowed position
• initial margin: what you post to open
• maintenance margin: the level that triggers liquidation
• liquidation: the forced close when equity runs out
• leverage: the multiple the mode has to support

Questions

Which mode is safer?

Neither, in general. Isolated limits the loss per position and liquidates sooner; cross survives larger moves and puts the whole balance at risk. Pick based on what you are willing to lose.

Can I switch modes on an open position?

Most venues restrict or forbid it. Treat the choice as fixed at entry and check your exchange's own rules before assuming otherwise.

Does adding margin help once I am underwater?

It moves the liquidation price further away, which buys room. It also increases the amount you can lose on that position, so it is a decision to commit more rather than a repair.