Isolated margin is a risk management mode that limits your potential losses to a specific amount on a particular position. You allocate a set amount of your balance to a position, and that amount is kept separate from your other positions and overall available balance. If the position is liquidated, only the allocated margin is lost. The rest of your account remains untouched.
How Does Isolated Margin Work?
Isolated margin operates through three mechanisms that govern how your collateral is managed per position.
Margin allocation. You choose the leverage level for a trade or position, which determines the initial margin required. Higher leverage means less initial margin but a closer liquidation price.
Loss limitation. If the trade moves against you, losses are limited to the initial margin assigned to that particular position. Your other positions and remaining account balance are protected.
Liquidation. If losses on a trade exceed the maintenance margin threshold, that position is liquidated. Your available balance is not used to add margin. The exchange closes the position and the allocated margin is lost.
Unlike cross margin, isolated margin does not draw from your wider account to prevent liquidation. Each position stands alone.
How Does Isolated Margin Compare to Cross Margin?
There are two margin modes under Single Asset Margining on BitMEX: isolated margin and cross margin. The key difference is how collateral is scoped.
Cross margin uses your entire account balance as margin for all open positions. This can help prevent liquidation but also means that losses in one position can affect your entire account.
Isolated margin restricts the margin to a specific position. Potential losses on that trade are capped at the allocated amount.
Cross margin favours capital efficiency across multiple positions. Isolated margin favours controlled risk on individual trades.
What Are the Benefits of Isolated Margin?
Isolated margin provides four advantages for derivatives traders.
Controlled risk. You define the maximum potential loss for each position. No trade can exceed the margin you allocate to it.
Limited liability. Your potential losses are capped at the initial margin set for that position. The rest of your account balance is protected.
Flexibility for speculative trading. You can take higher-risk positions without risking your entire account balance. This makes isolated margin suitable for testing new strategies or trading volatile assets.
Adjustable leverage. You can dynamically adjust your leverage for a position. Increasing leverage reduces the margin allocated; decreasing leverage adds more margin and pushes the liquidation price further away.
When Should You Use Isolated Margin?
Isolated margin is often preferred in three trading scenarios.
Speculative trades. When you want to take a calculated risk on a specific trade without exposing your entire account balance.
Short-term trading. When you want to quickly enter and exit a position with a defined risk. The capped loss makes position management straightforward.
Testing new strategies. When you want to experiment with a new trading approach without risking a significant portion of your capital. Isolated margin ensures that a failed experiment does not affect your other positions.
What Is the Liquidation Risk with High Leverage on Isolated Margin?
Highly leveraged positions, especially in volatile markets, are more susceptible to liquidation. A 50x leveraged position can be liquidated by a relatively small 2% adverse price movement.
Because isolated margin does not draw from your wider account balance, there is no additional buffer beyond the allocated margin. The higher the leverage, the smaller the price move needed to trigger liquidation.
To minimise this risk in volatile markets, avoid using high leverage. Lower leverage increases the margin allocated to the position, providing more room before the liquidation price is reached.