Everyone who trades contracts will run into one problem: how margin is actually “played.” I’ve noticed that many beginners still don’t fully understand the difference between cross margin and isolated margin, so today I’ll talk about it.

First, you need to understand two concepts. The margin required when opening a position is called the initial margin. The minimum margin needed to maintain an open position is called the maintenance margin. There are two contract margin modes: cross margin, and isolated margin.

In cross margin mode, all available balances in your account can be used as margin. After the position starts losing money, the system automatically replenishes margin from your account balance until it can no longer do so, at which point the position will be liquidated. The advantage is strong loss resistance—when your position loses, you still have a chance to turn things around. But the risk is higher too. If the market moves especially violently, your entire account could be wiped out and end up at zero.

Isolated margin is different. The margin for each position is independent, and the system will not automatically add more margin—you must add it manually. This means that if one position is liquidated, it only loses the margin of that position and does not affect other funds. However, relatively speaking, it’s easier for a single position to be liquidated.

Let’s use a practical example. Suppose you and your friend both have 2000U, and each uses 1000U with 10x leverage to go long on BTC. You use isolated margin, and he uses cross margin. If BTC drops to the liquidation price, you lose 1000U and get liquidated, leaving you with 1000U. His position loses 1000U, and the system automatically replenishes margin so the position stays open. Then if BTC rebounds, he can turn the loss into a profit. But if it continues to fall, he may end up losing all 2000U.

So choosing which mode to use really depends on your trading style. Cross margin is suitable for people who want more chances to turn things around and can tolerate high risk. Isolated margin is suitable for those who want precise risk control and don’t want to get “dragged down.”

When it comes to margin calculation, there’s a formula you need to remember: position margin equals the position value divided by leverage, plus any manually added amounts, minus any reductions, then plus unrealized profit and loss. The liquidation risk is calculated based on the ratio between position margin and maintenance margin. When the risk reaches 70%, you’ll receive a warning; if it exceeds 100%, you’ll be liquidated immediately.

In summary, cross margin and isolated margin each have their own way of playing—neither is absolutely better. The key is to choose according to your own risk tolerance. For beginners, it’s recommended to start practicing with isolated margin. Once you have a deeper understanding of the market and leverage, then consider using cross margin.