Cross Margin

If you have followed the path of tutorials you might have noticed that all examples I have given have used isolated margin (5x, 10x etc.) but there is another margin type - cross margin.

In the next article I will explain everything you need to know about cross and isolated margin.

By now you are already familiar with the isolated margin mechanism because Steve has only been using an isolated margin.

Isolated margin is a restricted amount of margin assigned to a position. For instance, if you use 10x your margin is roughly quantity / 10 at initialize.

The positive side of an isolated margin is the impossibility of losing more than invested. So if you invested $10 with an isolated margin, $10 is the maximum amount you could lose. If your margin falls below the essential maintenance margin your position is taken over by liquidation mechanism.

In fact, Bitmex lets you increase or decrease the amount of margin for positions by clicking on the margin of the position. The click toggles modal from which you could add or remove margin. So if you are certain with your intentions you could sometimes find it useful when your positions get close to liquidation - you could add some margin to move further away from it.

Cross margin (or spread margin) is a bit different animal. Cross margin uses all available funds to avoid liquidation, meaning if you get liquidated your whole balance is gone.

Once upon a time, Steve tried getting liquidated with cross margin and it tasted like a rotten tomato. Luckily for him, he did not have too many funds in his balance but still.

The concept of cross margin is rather simple. At init, you buy positions with the highest leverage possible. Now if the price moves in the opposite direction and your margin falls below required maintenance margin, Bitmex takes an additional margin from your available balance. If you do not have enough available balance to add to margin, your position will be taken over by liquidation mechanism.

An important aspect to note is that when using cross margin with different positions at the same time, then all positions use the same available balance to add to the margin. This might put your liquidation price much closer.

There is no correct answer to this question but one thing is certain - if you are a beginner you should always use isolated margin with small leverage (and of course little funds) just to see how things work in margin trading. As you get more experienced you might want to move to cross margin, since your funds are not taken away from available balance sooner than needed.

Steve, at first, used mostly isolated margin, but now he prefers cross margin since he does not do unexpected things now like forgetting to enter stop-loss or placing stop-loss after liquidation (these things happen).

I would say that using cross margin is safe until you know where your stop-loss must be. You can change your margin type to cross by choosing cross from liquidation picker, every other option there is isolated.

By now you should understand how different margins work. Now let’s take a closer look at a predator called liquidation.