Lesson 03 · 6 min

The cash you lock up

Initial margin opens the trade. Maintenance margin is the line that closes it. Isolated and cross decide whose cash is standing there.

A small ivory block sealed in its own frame, beside the same block poured into a larger pool. — Isolated keeps one slice in its own frame. Cross pours that slice into the whole wallet.

Margin is a deposit. Initial margin is what you need to open. Maintenance margin is the lower balance you must keep. Between those two lines the trade is hurting and still open. Under the second line, the venue takes over.

Wallet $1,000. You assign $200 at 10×, so the position is $2,000. Drag how far price moves against you.

Isolated

Closed

Lost $200 · Left $800

The $200 is gone. The other $800 was never in the trade.

Cross

Still open

Lost $200 · Left $800

The trade is still open. The rest of the wallet is now the airbag, and it can be spent.

Move against you+10%

Drag the adverse move. Both columns are the same position: $200 set aside, 10×, so $2,000 of coin. Isolated can only spend the $200. Cross can spend the rest of the $1,000 wallet trying to keep the trade alive.

Isolated: you choose the slice. You can lose that slice. The rest of the wallet stays out of that trade.
Cross: liquidation is farther away. The price of that courtesy is the whole free wallet.
Kraken's derivatives ticket defaults to cross. If you wanted a slice, you have to change it.

In one sentence. Isolated risks a slice and dies sooner. Cross lives longer and can spend the wallet.

What is the honest description of cross margin?

PreviousNext lesson