Topic: Cross margin or isolated margin trading, which is the best. (Read 97 times)

I will like to hear the opinions of traders here about the best type of margin trading. But before that, I will like to give more insight into margin trading so that some new traders can gain from this and maybe also contribute.

What is margin trading
To make this simple, in margin trading, traders can leverage. This means that traders can use collateral to borrow funds and use the borrowed funds to trader. The borrowed funds can be 3x or more in such a way a trader can borrow in a future contract 100x to 125x on some exchanges. The higher the levarage, the high will be the gain while also the high is the risk which depends on the market price of the coin your are trading.

For example
In a margin trade of 10x, a trader can use $100 as a collateral to borrow $1000.

Buy (go long) vs Sell (go short)
A trader can decide to go long or go short. If a trader go long, that means if the coin he bought is increasing in price, the profit will be increase but if the price is decreasing, it results to loss and can lead to collateral liquidation. But if a trader go short, that means as the price is decreasing, he will make profit but if the price is increasing, the traderks losing and can result to collateral liquidation. In this example, I am specifically making use of buy (long positon)

Isolated margin
I will make use of example for simplicity. Assuming a trader has $500 in his isolated margin account, he trade 10x with $100. That means he automatically borrowed $1000 to trade while leaving $400 in his isolated margin account. Assuming the coin he his trading is bitcoin and at a price of $19200 when he used borrowed fund to buy bitcoin. Assuming the liquidation price could be $19000 for 10x margin. If the price of bitcoin decreased below $19000, the trader collateral ($100) will be liquidated without affecting the remaining $400 in his margin account.

Cross margin
In cross margin, the whole $500 the trader transfered to his margin account will be liquidated, but instead of it to be liquidated at $19000 in the long position as explained above, it will be liquidated at a lower price, let us assume it to be $$18700.

As a trader, which one is better. Cross margin or isolated margin?

Warning: margin trading is very risky.