In different trading situations, traders may want to use different margin modes to manage their risk. On the Bingbon platform, there are two different margin modes for users to utilize — Cross Margin and Isolated Margin Mode — and each has its own unique advantages, disadvantages, and features.
Let’s take a look at how these different margin modes work, and in which situations users should use these different modes.
First, to adjust your margin mode on Bingbon, go to the trading page and select your margin mode in the top right corner.
Isolated Margin
Isolated Margin mode allows traders to manage their risk on individual positions by restricting the amount of margin allocated to each position. The allocated margin balance for each position can be set and adjusted individually.
If a trader’s position is liquidated in Isolated Margin mode, instead of their entire margin balance being lost, only the Isolated Margin balance of the trade gets liquidated.
Example: A user has an account balance of $500. The user takes a long position of $100 at 50x leverage. If the market moves down by 2%, the position will be liquidated, the entire margin of the trade ($100) will be lost, and the account balance will be $400.
Advantages: As losses are limited to the initial margin of the trade, this ensures high-leverage or speculative trades do not lose your whole account balance.
Disadvantages: A trade approaching a 90% loss could potentially be liquidated before becoming profitable.
Restrictions: When using the copy trading feature on Bingbon, users must be in isolated margin mode.
Cross Margin
In Cross Margin mode, the entire available balance is automatically shared across all open positions to prevent liquidations. Users do not need to manually allocate funds to maintain minimum margin requirements.
Example: A user has an account balance of $500. The user takes a long position of $100 at 50x leverage. If the market moves down by 2%, the position will remain open at a $100 loss, and the floating account balance will be $400.
If the market moves down another 1%, the position will remain open at a $150 loss, and the floating account balance will be $350.
If the market moves up 3%, the position will still be open at a $0 loss, and the floating account balance will be $500.
Advantages: Unrealized losses from trades can utilize the margin balance of the cross margin account to ensure they aren’t liquidated, allowing losing trades to be opened for longer and potentially turn into a winning trade.
Disadvantages: It is easier to lose the whole account balance in cross margin mode, as the whole cross margin account balance will be utilized by open positions.
Restrictions: Copy trading is not available when a user is in Cross Margin mode.
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