Isolated Margin

Isolated margin is a term used in cryptocurrency trading to refer to a margin trading account that allows traders to trade with borrowed funds without risking their entire account balance. Unlike cross margin, which uses the trader's entire balance as collateral, isolated margin sets aside a specific amount of funds to cover each individual trade. This helps traders to better manage their risk and avoid catastrophic losses.

For example, suppose a trader has an isolated margin account with a total balance of 1 BTC and wants to make a trade with a 10x leverage. They can allocate a portion of their balance, say 0.1 BTC, to the trade and use the remaining 0.9 BTC as collateral. If the trade is successful, they will receive profits on the full 1 BTC. However, if the trade goes against them and they lose the 0.1 BTC allocated to the trade, they will only lose the 0.1 BTC and still have 0.8 BTC left in their account.

Isolated margin is commonly offered by cryptocurrency exchanges that offer margin trading, including Binance, Bitfinex, and Kraken. It can be a useful tool for experienced traders looking to take advantage of short-term price movements in the cryptocurrency markets, but it is also important to understand the risks involved and use caution when trading with leverage.

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