You’re about to open a perps trade. The platform asks you to choose: cross margin or isolated margin. You’ve seen both options. You’ve probably clicked one without fully understanding what it does. This matters more than you think — it controls how much of your account is on the line if a trade goes wrong.
The Core Difference
Both margin modes determine what happens to your collateral when you open a leveraged position. The difference is scope.
Isolated margin: You assign a specific amount of collateral to a single trade. That trade can only lose what you assigned to it. If it gets liquidated, the rest of your account is untouched.
Cross margin: Your entire account balance acts as collateral for all your open positions. Every trade shares the same pool of margin. This gives each position more room to breathe, but a big loss on one trade can eat into funds you were using to back other trades.
Same leverage, same position size, same entry price — but very different risk profiles depending on which mode you pick.
Isolated Margin: How It Works
With isolated margin, you decide exactly how much collateral to commit to each trade. That’s it. That’s your max loss on that position.
Example: You have $5,000 in your account. You open a 10x long on ETH and assign $500 as isolated margin, giving you $5,000 of exposure. If ETH drops enough to eat through that $500, your position gets liquidated. You lose $500. Your remaining $4,500 is completely safe.
The liquidation price is calculated based on that $500 of margin. It’s closer to your entry price than it would be with cross margin, because there’s less collateral backing the position.
Think of isolated margin like putting chips on a single number at the roulette table. You know exactly what you can lose before the wheel spins.
Cross Margin: How It Works
With cross margin, your whole account balance is fair game. Every open position draws from the same collateral pool.
Example: Same setup — $5,000 in your account, 10x long on ETH with $5,000 of exposure. But this time, all $5,000 of your balance is backing the trade. Your liquidation price is much further away because there’s more collateral absorbing the loss.
That sounds better, right? More cushion, harder to get liquidated. And it is — for that one trade. The problem shows up when you have multiple positions open.
If your ETH long starts losing badly, it’s pulling margin from the same pool that’s backing your BTC position, your AAPL position, and everything else. A big enough loss on one trade can drag your entire account toward liquidation across all positions.
When to Use Isolated Margin
Isolated margin is the safer default for most situations. Use it when:
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You’re trying a new strategy. Cap your downside while you test something unfamiliar. If it doesn’t work, you lose the margin you assigned and nothing more.
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You’re taking a high-conviction directional bet. You want to put a defined amount at risk on a specific trade without exposing the rest of your account.
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You’re running multiple positions. Isolated margin means a bad trade on ETH can’t liquidate your BTC position. Each trade lives in its own box.
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You’re trading volatile assets. Higher volatility means wider price swings. Isolated margin makes sure one bad wick doesn’t cascade through your whole account.
When to Use Cross Margin
Cross margin has real advantages in specific situations:
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You’re hedging. If you’re long BTC and short ETH as a pairs trade, cross margin lets the profits on one side offset losses on the other. Your net exposure is managed at the account level, which is how hedges are supposed to work.
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You want to avoid liquidation on a single position. Cross margin gives your trade the maximum possible cushion. If you have strong conviction and want the position to survive a deep pullback, cross margin keeps your liquidation price as far away as possible.
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You’re an experienced trader managing correlated positions. If you understand how your positions interact and you’re actively monitoring your account, cross margin gives you capital efficiency — you’re not locking up separate margin pools for each trade.
The Liquidation Price Difference
This is the most practical distinction. Same trade, different margin mode, different liquidation price.
Isolated margin example: $500 margin, 10x long on ETH at $3,000. Liquidation price: roughly $2,700. ETH needs to drop 10% and you’re out.
Cross margin example: $5,000 account balance, same 10x long on ETH at $3,000. Liquidation price: roughly $2,050. ETH would need to drop over 30% to liquidate you.
That extra cushion on cross margin is real. But remember: if ETH does drop 30% and liquidates you on cross margin, you just lost $5,000 instead of $500.
Isolated margin gets liquidated more often. Cross margin gets liquidated less often, but when it does, the damage is bigger.
Can You Switch Between Them?
Most platforms let you switch between cross and isolated margin on a per-position basis. You can run some trades on isolated and others on cross, depending on your strategy.
Some things to keep in mind:
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You usually can’t switch an open position from one mode to the other. You’d need to close it and reopen.
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On isolated margin, most platforms let you add margin to an open position to push the liquidation price further away.
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On cross margin, unrealized profits on one position can help support other positions. This creates dependencies between trades that you need to be aware of.
The Simple Framework
Not sure which to pick? Start here:
Default to isolated margin. It gives you defined risk on every trade. You always know exactly how much you can lose. For most traders, most of the time, this is the right call.
Use cross margin intentionally. When you have a specific reason — hedging, max cushion, capital efficiency across correlated positions — switch to cross. But understand that you’re connecting your trades to each other when you do.
There’s no universally correct answer. The right margin mode depends on your strategy, your position count, and how much risk you want concentrated vs. distributed.
Trade Perps on Liquid
Liquid gives you the flexibility to trade perps your way — across crypto and equities, all on-chain.
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Create your account. Sign up with email or connect a wallet. On-chain, self-custody.
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Deposit USDC or USDT. No waiting periods. Your margin is ready immediately.
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Choose your margin mode and trade. BTC, ETH, AAPL, TSLA, and more — 24/7. Go long, go short, your way.
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Earn points. Every trade earns points through Liquid’s points program.