Understanding the Distinctions Between Isolated and Cross Margin Modes

Gate's futures trading platform offers two distinct margin modes: isolated and cross. Traders can select their preferred leverage and margin mode on the trading interface. It's important to note that the chosen leverage impacts the position margin in isolated mode and the initial margin in cross mode.

Exploring Isolated Margin Mode

In isolated mode, the position margin remains constant. Traders can modify the initial margin by adjusting leverage or risk limits. A liquidation event is triggered when the margin balance falls below the maintenance threshold. In this scenario, the position margin represents the maximum potential loss for the trader.

To calculate the isolated position margin, use this formula: Number of contracts * Average entry price / Leverage

Let's consider an example: You initiate a long position of 0.1 BTC in BTCUSDT futures at $50,000, employing 25x leverage.

Your isolated position margin would be: 50000 * 0.1 / 25 = $200

Should this position face liquidation due to market volatility, you would only forfeit the margin allocated to this specific trade, leaving other funds in your futures account unaffected.

Delving into Cross Margin Mode

Cross margin mode utilizes the entire balance in your futures account as collateral for your positions. You have the option to set multiple futures contracts to cross mode, allowing them to share the account balance as margin. However, it's crucial to understand that unrealized profits from profitable positions cannot serve as margin for other trades.

The cross initial margin is calculated as follows: Number of contracts * Average entry price / Leverage

The cross position margin encompasses the total balance of your futures account.

Consider this scenario: You open a long position of 0.1 BTC in BTCUSDT futures at $50,000, using 25x leverage in cross mode, with a total account balance of $1000.

Your cross initial margin would be: 50000 * 0.1 / 25 = $200

However, your cross position margin remains $1000, as it includes all available funds in your futures account. In this mode, liquidation occurs when the position's loss surpasses your entire account balance.

Choosing Between Margin Modes

Traders can flexibly select between isolated and cross margin modes based on their risk tolerance and trading strategies. Isolated mode offers a fixed position margin, enabling better risk management and margin control. Cross mode, utilizing the entire futures account balance as margin, provides a simpler, more straightforward approach to trading.

It's essential to carefully consider your trading objectives and risk appetite when deciding between these two margin modes on Gate's futures platform.