Cross Margin is a margin setting that uses your entire account balance as collateral for all your open positions. This means that your losses from one position can be offset by gains from other positions, and your entire account balance is at risk of liquidation. Cross Margin is the default setting.
How Cross Margin Works
When you use Cross Margin:
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Margin is Shared: Your entire account balance acts as collateral for all your open positions
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Liquidation Risk: Your entire account is at risk of liquidation if the combined losses of all your positions exceed your total account balance
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PNL Sharing: Unrealised profits from one position can offset losses from another
Cross Margin vs. Isolated Margin
There are two margin modes under Single Asset Margining:
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Cross Margin: Uses your entire account balance as collateral for all open positions
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Isolated Margin: Restricts the margin to a specific position, limiting potential losses to the initial margin set for that position
Benefits of Cross Margin
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Liquidation Prevention: Cross Margin can help prevent the liquidation of individual positions, as profitable positions can help offset losses from losing ones
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Capital Efficiency: It allows you to utilize your entire account balance as collateral, potentially freeing up funds that would otherwise be held as isolated margin for each position.
Risks of Cross Margin
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Increased Risk of Total Liquidation: The risk of liquidation is higher in Cross Margin mode because a large loss in one position can lead to the liquidation of your entire account.
When to Use Cross Margin
Cross Margin is best suited for experienced traders who:
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Have a diversified portfolio of trades that they are actively hedging
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Want to maximize capital efficiency
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Are comfortable with the risk of losing their entire account balance