Cross-margin is a margin calculation method in trading where all available assets in a user’s account are used as collateral for all open positions. Unlike isolated margin, which allocates specific collateral to individual positions, cross-margin pools capital to cover margin requirements across multiple trades. This approach can reduce the risk of liquidation for individual positions as long as the total account equity remains sufficient. It offers greater flexibility in managing risk across a portfolio.
Context
In cryptocurrency derivatives trading, cross-margin is a widely utilized feature on many centralized and decentralized exchanges, allowing traders to optimize their capital usage. The main discussion points often revolve around the heightened liquidation risk if the entire portfolio experiences a significant downturn, as a single large loss can impact all positions. Future platform developments aim to provide more sophisticated risk management tools and clearer visualizations of collateral usage to help traders manage their cross-margin exposure effectively.
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