Isolated vs Cross Margin: Which One Should You Use?

[00:03] lot of doubt about regarding which margin to use: isolated or cross-margin. So, without further ado, let's go to the video. This is the first step in choosing whether to use isolated or cross-margin. We know the difference between these margins, and

[00:20] if we look at the option to change margins in the upper right corner, we can get a brief summary of what each margin is about. Okay, but basically, the cross-margin will take into account all the

[00:33] future, which I usually call the bankroll. Some people don't like me calling it the bankroll because of binary options, betting houses, etc., or maybe it 's a habit. So I say bankroll. Okay, but it's like the capital we

[00:47] so the cross-margin will take into account the entire balance of your account for settlement. For example, in this Barra account, we have a balance of $55. So, even if I open a trade of only five dollars, it

[01:01] will take into account the settlement margin on top of the $55, and this will modify the... Our liquidation price, which I'll show you later, is already in the isolated margin. Here, it will only take into account the balance

[01:15] you put into that operation. So, if I open a position with five dollars, my liquidation margin will be calculated on five dollars, and with that, I don't risk the other $50 I have in my account. But in

[01:29] return, my liquidation price will be lower. So, for example, to better illustrate this on the chart, let's suppose we open a position on delonghi.com with 10x leverage. Our target in this case won't matter; I just want to

[01:41] show you the difference between the margins. So, let's say we know the leverage position, right? We should say that for these 10x, we put five dollars. Okay, pulling our leverage test is the

[01:53] same as saying that if the price falls 10 percent of your position, as we are So, let's say we open a position at 29,1832. Okay, I'm on the

[02:05] Bitcoin chart here, a leverage target, and with a capital of $5 in isolated margin. Okay, what What this means is that if the price moves 10 percent down, I will simply be liquidated, right? I pulled

[02:18] the 10x here and we found a value of 261833. So let's draw a line here exactly at this point. So with isolated margin, I'm risking five dollars, and my liquidation price is

[02:32] in this region here. In other words, if you don't work with a stop loss, the maximum your price will reach is this region here where you will be liquidated, and this is with leverage testing. But now, what happens if I put

[02:45] this same operation in cross margin? Since I have another $50 as collateral, what will happen is that $50 as collateral, what will happen is that each $5 will represent another 10 percent loss, right? So let's add a little text here. We

[03:00] we will lose almost five dollars. If we pull here, in this case 20 percent, in this region here we will lose another five dollars. So here we have already lost ten dollars. If I pull now 30 percent, in this region here we

[03:13] will lose another five dollars, and so on. So notice that using the Using cross-margin, we keep pushing our liquidation price lower. In this example I showed you, with leverage and,

[03:25] in this case, using 10 percent of the bankroll at the DeLonghi opening, we wouldn't just be liquidated if it reached zero. So, using isolated margin, our position would be closed here in this region of 26,000. It didn't reach our

[03:38] liquidation price. Now, using cross-margin, our price be liquidated. And what is the advantage of using cross-margin? If you're enjoying this video, don't forget to like and subscribe to the channel.

[03:51] Activate the notification bell so you don't miss the next videos. Leave your questions and suggestions in the comments. With that done, let's continue with the video. For entry point, so we made a very bad entry, we

[04:05] lost the liquidation price. So, if we were using isolated margin, we would already have been liquidated, and the price would move until it reached a support here, at 25,000 for example, at this moment we would be

[04:17] losing. $10 on the crossed margin, but the price managed to form a bottom, it went up, and here we managed to execute a trade. So, you see, with a crossed margin, we can have more room for trades where our

[04:30] entry wasn't so well done. Even if we reverse the entry, we can have a larger margin, right? Okay, so why not use I showed you is a long trade on Bitcoin with

[04:45] 10x leverage, where we only used 10% of the bankroll to enter the trade. So, 10 times 10, we can have a liquidation price of 15. What is the chance of Bitcoin turning to 0? Practically zero if we analyze it. We

[04:59] are already forming a bottom in Bitcoin, so much so that the setup that uses the next delivery is already giving an entry signal for a short position. I haven't drawn yet because we are in a support region for the price of Bitcoin. So the

[05:11] proof is here, it's sideways, maybe there will be a downward correction, but in the future we may have an upward leg. So, in this crossed margin, even if we reverse the trade here... We'll appreciate it, and inevitably, at some point, the

[05:25] price of Bitcoin will rise again. So the only question is time— how long will this operation last? Even if Bitcoin comes and goes, at some point it will pass through the $30,000 range again. Now,

[05:38] how long you'll remain allocated in this position is an unknown, but if you don't accept your loss, sooner or later you'll be able to recover at least the value of your entry. Okay, but this is a specific case. Cross-margin EA

[05:51] now I'll give you another example. Let's say we're going to use this same point as an entry, but this time for a short position with our a short position with our $55 bankroll. Let's put in $30 with

[06:04] 20x leverage. So in this case, we'll open a short position with $30 and 20x leverage, with the total capital in futures at $55. And in this case, since we're using 20x leverage, our settlement price would be five percent above,

[06:19] in the region of $31,300. So, using isolated margin, when it reaches $31,300, we will... We're going to lose $30 when we're liquidating our positions, but instead of using isolated margin, we're going to increase the liquidation price

[06:35] by about ten percent. Instead of putting up $30 as collateral, we're putting up the entire $55 of our account. In this case, we're setting our liquidation price to 32,900, and in this region, we'll lose

[06:52] $55. Notice that with higher leverage, we didn't have higher leverage, we didn't have risked all our capital. In this case, instead of losing just $30,

[07:05] we lost our entire account. Another problem with using crossed margin is that you can allocate capital to further increase your margin. Let's say you're at this region and practically liquidated. What you

[07:20] can do is put up another $30 and raise your liquidation price by five percent, taking it to 34,600. But in this case, you'll lose $85. Let's say the price reaches this region again; you can increase

[07:36] your margin even further, or you can now put up more. $60 raising your liquidation price by 25 percent in this case. You would only be liquidated at $ in this case. You would only be liquidated at $ 37,400, but here you would already be losing

[07:51] $145. Notice that this is cross-margin. If done incorrectly, you end up losing your equity, especially if you use it for short selling. Imagine this: we are forming a real Bitcoin bottom, and now we are starting an

[08:06] upward leg. When will the price return to the $30,000 range? Maybe never. Okay, so let it take years and years for that price to return to that level. And every time we have new upward legs, you will have to put in more capital

[08:20] to maintain your position. That's why the ideal for those who are starting is to quickly accept a loss. If you use the risk management that I taught here on the channel, you will see that even putting in $30, our loss will always be half of the

[08:34] entry of your position, which in this case will be $15. And if you place a Stop below the liquidation price of the isolated margin, it makes no difference whether you work with isolated margin or cross-margin. That's why it's

[08:47] important to accept taking the stock and consistency in the market. In finance, knowing how to lose is pointless. Opening a position with an extremely high liquidation threshold is useless if you miss the entry point. In this case, the

[09:01] liquidation threshold will only buy you time and increase your losses. That's why beginners should focus on using isolated margin. This way, you're only risking the capital of your entry, not the entire capital of your

[09:15] futures bankroll. Another important point to highlight about cross-margin is that it takes into account even the positions you have open. For example, let's a trade with a profit of five dollars ( in our PNL case), but you would already have

[09:31] $60 left over, and you open another position, this time in Ethereum. If you use cross-margin, it will take even the five dollars you have n't yet realized in profit in Bitcoin as margin for your trade. And if

[09:45] you are liquidated in the Ethereum cross-margin, you will automatically be liquidated in Bitcoin and lose even the profits from a successful trade. Therefore, working with cross-margin requires a bit more

[09:58] experience, but it's not all risk, as I showed in the first example of the video. There are some setup strategies that cross-margin can handle. It's extremely important, for example, let's say you open a Bitcoin position at five dollars, leveraged 20x,

[10:10] and it looks like a leveraged position. You 'll open with five dollars leveraged 20x, so your liquidation price is at 28,400.

[10:22] But if you use cross margin and put your entire futures bankroll as collateral, your liquidation is around 15,000. Notice the large margin for error you have in this operation, considering the fundamentals

[10:36] of Bitcoin. Assuming we are already in a support zone along with a bottom, even if you are centered at 30,000 and you lose the 28,000 region with cross margin, you still won't be liquidated. In these cases, the probability

[10:51] is that you wait for the price to return to the 30,000 range. So even if you don't accept your losses, it's only a matter of time before you recover this operation. Obviously, you are running the risk of the price reaching

[11:05] 15,000 dollars and being liquidated, but the greater probability is that the price will eventually reverse, and again, cross margin is strictly based on the fact that this is a long position and an extremely well- funded asset. With leverage

[11:19] according to the size of your bankroll, if you operate with 100% of your capital, it makes no difference whether you use isolated margin or cross margin, especially since both have the same rates. Therefore, cross margin is

[11:33] only useful in some situations and mainly for more experienced traders. If you are a beginner starting in the market, opt to work only with isolated margin, always keeping an eye on the margin with good

[11:46] leverage, good risk management, and a good strategy. Note you don't work with a stop loss, because the difference with cross margin is precisely the liquidation price. If you are working with a strategy using a

[12:00] stop loss before the liquidation price in isolated margin, cross margin will simply be useless. Therefore, study your strategies and your helped clarify things

[12:12] about cross margin and isolated margin. If you liked this content, leave a like. If you are not subscribed to the channel, subscribe and follow Ghost Camera on Instagram at Trader and join the exclusive Telegram channel for tips and

[12:24] market analysis. Links in the description. I'm leaving two videos. On the screen, you'll find information that will help you with your transactions with Christ coins. It's worth watching. That's all coins. It's worth watching. That's all folks, until the next video.