Isolated vs cross margin, explained with examples
With isolated margin, each position has its own margin and its own liquidation price. A loss can only use up the margin assigned to that position. With cross margin, the whole account balance supports every open position. Positions can survive larger moves, but a loss on one shrinks the buffer for all the others.
Examples use illustrative prices and a simplified model. Real venues add fees, tiered maintenance margin and mark-price rules.
What isolated margin is
Isolated margin ring-fences margin for each position.
When a trader opens a position in isolated mode, they assign it a fixed amount of margin. That margin, and only that margin, absorbs the position’s losses. If losses reach the maintenance level, the position is liquidated. The rest of the account is untouched.
Each isolated position has its own liquidation price. Adding margin moves that price further away. Removing margin moves it closer.
What cross margin is
Cross margin pools the whole account balance behind every open position.
There is no fixed margin per position. Instead, the account’s total equity, meaning balance plus unrealised profit and loss, must stay above the total maintenance margin of all positions. Gains on one position can support another. Losses on one position reduce what is left for the rest.
If total equity falls to the total maintenance margin, positions are liquidated. Depending on the venue, that can mean some or all open positions.
The simplified model
The example uses the same simplified model as leverage, margin and liquidation explained:
- Maintenance margin rate: 0.5% of notional value at entry
- Liquidation when margin (isolated) or total equity (cross) reaches maintenance margin
- No fees or funding. A liquidated position loses its full margin; whether any remainder is returned varies by venue
Worked example: two positions, two modes
The account
- Balance: $2,000.00
Position A: long BTC perp
- 0.1 BTC at $60,000.00 → notional value $6,000.00
- 10x leverage → margin $600.00
- Maintenance margin: $6,000.00 × 0.005 = $30.00
Position B: long ETH perp
- 2 ETH at $3,000.00 → notional value $6,000.00
- 10x leverage → margin $600.00
- Maintenance margin: $6,000.00 × 0.005 = $30.00
Isolated setup
Each position holds its own $600.00. The other $800.00 sits unused as free balance.
- Position A can absorb $600.00 − $30.00 = $570.00 of loss
- A’s estimated liquidation price: $60,000.00 − ($570.00 ÷ 0.1) = $54,300.00
- Position B can absorb $570.00 of loss
- B’s estimated liquidation price: $3,000.00 − ($570.00 ÷ 2) = $2,715.00
Cross setup
All $2,000.00 backs both positions.
- Total maintenance margin: $30.00 + $30.00 = $60.00
- Total loss the account can absorb: $2,000.00 − $60.00 = $1,940.00
Scenario 1: BTC falls 10% to $54,000.00, ETH unchanged
BTC loss: 0.1 × ($60,000.00 − $54,000.00) = $600.00
Isolated. $54,000.00 is below A’s liquidation price of $54,300.00, so A is liquidated. The loss is capped at A’s $600.00 margin. B is unaffected.
- Account equity: $2,000.00 − $600.00 = $1,400.00
- Positions open: B only
Cross. The $600.00 loss is unrealised. Equity is $2,000.00 − $600.00 = $1,400.00, well above $60.00, so nothing is liquidated.
- Account equity: $1,400.00
- Positions open: A and B
- Remaining buffer: $1,400.00 − $60.00 = $1,340.00
Equity is the same in both modes. The difference is that cross kept A open. A could still recover, or lose more.
Scenario 2: BTC falls 20% to $48,000.00, ETH falls 5% to $2,850.00
BTC loss if still open: 0.1 × ($60,000.00 − $48,000.00) = $1,200.00 ETH loss: 2 × ($3,000.00 − $2,850.00) = $300.00
Isolated. A was liquidated at about $54,300.00 on the way down, so its loss stays at $600.00. B’s loss of $300.00 is below its $570.00 limit, so B stays open.
- Account equity: $2,000.00 − $600.00 − $300.00 = $1,100.00
- Positions open: B only
Cross. Both losses come out of the shared balance.
- Total loss: $1,200.00 + $300.00 = $1,500.00
- Account equity: $2,000.00 − $1,500.00 = $500.00
- Positions open: A and B
- Remaining buffer: $500.00 − $60.00 = $440.00
In cross mode, the BTC loss has used most of the buffer that also protects the ETH position. A further combined loss of $440.00 would put the whole account at its liquidation level.
The two scenarios side by side
| Isolated equity | Isolated open | Cross equity | Cross open | |
|---|---|---|---|---|
| Start | $2,000.00 | A, B | $2,000.00 | A, B |
| Scenario 1 | $1,400.00 | B | $1,400.00 | A, B |
| Scenario 2 | $1,100.00 | B | $500.00 | A, B |
Neither mode is better in every case. Isolated capped the BTC loss. Cross kept both positions open, at the cost of a far larger drawdown and a thinner buffer.
Trade-offs at a glance
| Isolated margin | Cross margin | |
|---|---|---|
| Margin at risk per position | Only the margin assigned | The whole account balance |
| Liquidation price | One per position | Depends on total equity across positions |
| Distance to liquidation, one position | Shorter for the same leverage | Usually longer |
| Effect of one loss on others | None | Reduces the buffer for all |
| Gains on one position | Do not support others | Can support others |
| Monitoring | Per position | Whole account |
| Worst case | Loss of that position’s margin | Loss of most or all of the balance |
Questions traders often check
- Which mode is each position in? Many venues set the mode per contract.
- What is the free balance? In cross, it is part of the buffer for every position.
- How does a new position change things? In cross, adding a position raises total maintenance margin and moves the account’s liquidation level.
- Which price triggers liquidation? Usually mark price; see mark price vs last price vs index price.
Common mistakes
- Assuming cross means safer. It moves liquidation further away but puts more of the balance at risk.
- Forgetting the free balance in cross. Withdrawing or transferring it shrinks the buffer.
- Reading one liquidation price in cross. It shifts as other positions gain or lose.
- Ignoring fees and funding. Both change margin over time; see funding rates explained.
Related
For how forced closes across many accounts interact, see liquidation cascades explained. For the contract behind these examples, read what are perpetual futures.
Frequently asked questions
What is the main difference between isolated and cross margin?
The amount at risk. In isolated margin, only the margin assigned to a position can be lost if it is liquidated. In cross margin, the full account balance backs all open positions, so a large loss can draw down the whole balance.
Does cross margin reduce the chance of liquidation?
For a single position, cross margin usually puts liquidation further away, because the whole balance acts as a buffer. The trade-off is that liquidation, when it happens, can consume much more of the account.
Can I switch between isolated and cross margin?
Many venues allow switching per position or per contract, often only when no position or open order exists in that contract. Rules vary by venue, so check your venue's contract specification.
Can I add margin to an isolated position?
On many venues, yes. Adding margin to an isolated position moves its liquidation price further from the current price. Removing margin moves it closer. The change applies only to that position.
Hippo provides information, not investment advice.
Part of our guide: Perpetual futures funding rates, explained
