Introduction to Isolated Margin
Isolated margin is a vital feature in cryptocurrency margin trading that allows traders to manage their risk effectively. Unlike cross-margin, isolated margin limits the risk of liquidation to a single trading pair, protecting your remaining portfolio. In this guide, we’ll explain what isolated margin is, how it works, its benefits, and why it’s important for cryptocurrency traders.
What is Isolated Margin?
Isolated margin is a trading system used in cryptocurrency exchanges where the margin allocated for a particular position is kept separate from the rest of your account balance. This ensures that losses on a specific trade are limited to the funds allocated for that position, safeguarding your overall portfolio.
For instance, if you’re trading BTC/USDT on isolated margin, the funds you’ve allocated to this trade are at risk, but the rest of your account remains unaffected in case of liquidation.
How Does Isolated Margin Work?
Allocation of Funds: Traders allocate a specific amount of margin to a trade. This amount is isolated and not linked to the rest of the account balance.
Risk Management: If the trade moves against the trader, the losses are limited to the isolated funds. The rest of the portfolio remains intact.
Manual Adjustments: Traders can manually adjust the margin level for each isolated position to avoid liquidation.
Example:
Suppose you open a long BTC/USDT trade with an isolated margin of $500. If the market moves against your position, only the $500 is at risk, and the remaining balance in your account is safe.
Benefits of Using Isolated Margin
- Controlled Risk: Limits the loss to a specific position, ensuring other trades or balances are not affected.
- Flexibility: Allows traders to manage each position independently, adding or reducing margin as needed.
- Enhanced Portfolio Protection: Protects your overall portfolio from the risks of a single trade’s liquidation.
Isolated Margin vs. Cross Margin
| Feature | Isolated Margin | Cross Margin |
|---|---|---|
| Risk | Limited to the isolated funds | Affects the entire account balance |
| Management | Per position | Shared across all positions |
| Best For | High-risk trades or volatile assets | Low-risk trades or experienced traders |
When to Use Isolated Margin
- Trading High-Volatility Assets: Protect your portfolio from significant market fluctuations.
- Testing New Strategies: Ideal for testing new trading techniques without risking the entire account.
- Short-Term Trades: Useful for trades with a limited time horizon.
Tips for Using Isolated Margin Effectively
- Start Small: Begin with a small amount of margin to understand the mechanics of isolated trading.
- Monitor Positions Closely: Regularly check the performance of your isolated margin positions.
- Use Stop-Loss Orders: Mitigate risks by setting stop-loss orders for your trades.
- Stay Updated: Follow the latest market trends and news to make informed decisions.
Now let’s take a look at how Darkex Isolated Margin operations are performed
How to trade Isolated Margin on Darkex?
After logging into your Darkex account, click Futures on the page that opens.
After clicking on the cross option on the top right, you will see the Cross and isolated options.
And then, you can mark your trading mode as Isolated on the page.
Then you can continue trading by choosing one of the options Limit Order Market Order Stop Order.
Please click to learn more about Limit Order Market Order Stop Order.
Disclaimer
The information provided in this guide is for educational purposes only and should not be considered as financial or investment advice. Trading cryptocurrencies involves substantial risks, including the potential loss of your invested capital. Isolated margin trading can mitigate risks but does not eliminate them entirely. Before engaging in any margin trading activities, ensure you understand the associated risks and consider consulting with a qualified financial advisor. DarkEx is not responsible for any losses incurred while using this trading method.
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