About Cross Margin
With cross margin on Pi42, your entire futures account balance will be used as margin to support multiple positions, and the further hedge is in profit, the more that profit can be used to cover margins for other positions, helping avoid premature liquidation in highly volatile markets. You can also see an unrealized profit and loss from different positions pooled together with cross-margining for more dynamic margin management. This is flexible, which is why professional traders favor it, but it should be watched very closely because losing one position can melt down the entire account balance.
How Cross Margin Is Different from Isolated Margin
Isolated and cross margin modes differ in the way that they take care of the margin of your trades. Below is an in-depth comparison:
1. Margin Available to Trade
– Isolated Margin:
Each position is completely on an independent margin. If one of your trades runs into losses, the only thing that will be affected by that is the portion that was set aside for that particular trade. Other trades are not affected.
Formula:
Available to Trade (Isolated Margin Mode) = Futures Wallet Balance − Locked Margin − Unrealized Losses*
Example:
Wallet balance: $1000
Trade 1: BTCUSDT with $200 margin
Available margin: $800
The fact that this trade generates a $100 profit won’t increase available margin for other positions.
-Cross Margin:
All positions draw on the same margin pool and profits realized from other trades can be used for trades as well.
Formula:
Available to Trade (Cross Margin Mode) = Wallet Balance − Locked Margin + Unrealized Cross P&L*
Example:
Wallet balance: $ 1000
Trade: BTCUSDT with $ 200 margin and $ 100 profit
Available margin becomes: $ 1000 − $ 200 + $ 100 = $ 900
*Profits from one trade increase available funds for further trades.*
An assigned quantity for every trade is locked and de-linked. The damage caused by one trade does not have any effect on the margins of another trade; this makes isolated margin useful for controlling risk per position.
Example:
Trade 1: BTCUSDT, $200
Trade 2: ETHUSDT, $100
Total locked margin = $300, but each margin is attached to its trade.
*If the BTC trade liquidates, the ETH trade and its rest account remain intact. Then only the 200 margin is lost.
Cross Margin
The cross margin mode ensures more liquid margin management. Profit in a trade will pull up other positions, but loss in one can reduce other people’s margins and eventually trigger liquidation of all positions.
Example:
BTCUSDT position: $200 margin, $50 profit –
ETHUSDT position: $300 margin, $150 loss –
Total cross margin: $1000 − ($200 + $300) + ($50 − $150) = $400 –
Losses in a single position reduce the remaining margins of all other orders, and risk of liquidation increases.
3. Liquidation
Isolated Margin:
Each trade has a separate liquidation price. When the margin dedicated to a particular trade becomes insufficient, that trade alone is liquidated. Other trades are not affected.
Cross Margin:
Liquidation in cross margin is determined by a maintenance margin ratio. All of the positions may be liquidated simultaneously when the margin available across all positions falls below the desired threshold.
Equation:
Cross Margin Ratio = Maintenance Margin / Total Cross Margin
Rule of Thumb:
Smaller cross margin ratio, better and safer the positions are.
100% margin ratio will give liquidation for all open positions.
4. Risk
Isolated Margin:
More dangerous as each position is connected. Losses in one position run off against other positions in the wallet balance. This mode is more suitable for beginners who are willing to manage risks on a per-trade basis.
Cross Margin:
This mode is risky as losses from one position may completely drain the margin pool and resulting in liquidation of all positions. Although it demands constant control, this mode provides better flexibility for experienced traders who are handling multiple trades.
Which Mode is Good for Me?
Cross Margin
This mode is recommended to the advanced traders who can well handle multiple trades at a time. It is ideal to use profits from one trade in covering margin on other trades.
Recommended for low-volatility markets to avoid unexpected liquidations.
Isolated Margin
Best for beginners or traders looking to limit risks to individual positions.
Quite helpful in volatile markets as losses incurred by one position will not influence other positions.
Relatively more control over margin and risk management.
Use our cross margin mode at Pi42 to manage multiple futures positions with ease and great care, having real-time access to P&L tracking, margin adjustments, and leveraged trading options through cross margin at Pi42 to tweak your strategy without rigid margin structures.
The other offers from us include zero conversion fees when trading in INR and instant INR deposits to fund your futures wallet.
API integration for automated trading strategies
Whether you are a trader or merely looking to try out advanced high-level trading tools, you are on the right platform in Pi42, built to ensure efficient margin management.
Conclusion
Select between cross margin and isolated margin on Pi42 according to your trading goals and risk appetite. Cross margin gives higher flexibility as it pools all profits and losses into one account thereby suitability for an experienced trader running many positions. Isolated margin manages better potential risks since the amount lost per trade is only in that single trade, and it’s most suitable for beginners and those in a turbulent market.
With the Pi42, you are able to switch between the cross and isolated margin modes with regard to the condition of the market, which makes you adapt your trading plan. Be it profit optimization or risk protection, this tool will provide you with the very elements needed to trade futures successfully.
DISCLAIMER : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.