The Difference between Cross and Isolated Margin on Binance

Margin trading, also known as leverage trading, is a popular feature on many crypto-exchanges, including Binance. However, the terms "cross margin" and "isolated margin" are often used interchangeably, which can lead to confusion for new and experienced traders. In this article, we will explore the key differences between cross margin and isolated margin on Binance to help you make an informed decision when using this powerful trading tool.

What is Cross Margin on Binance?

Cross margin is a type of margin trading where the exchange borrows funds from a third-party lender to assist in financing the trades. On Binance, cross margin is the default margin mode, meaning that by default, new accounts will be set up using cross margin. Under cross margin, traders can use their positions to collateralize their margin account, allowing them to borrow more money to increase their trading leverage.

However, cross margin comes with some risks. If a trader's position loses value, the exchange can liquidate the position and use the funds to repay the lender. This can lead to the sudden closure of a trader's position, often without sufficient notice or time to adjust the trade.

What is Isolated Margin on Binance?

Isolated margin, also known as "self-custody margin," is a more conservative margin trading option available on Binance. With isolated margin, traders can keep their funds on their own wallet address, rather than borrowing funds from the exchange. This allows traders to have full control over their positions and reduces the risk of exchange-induced closures.

To use isolated margin, traders must have a minimum balance of Binance tokens (BNB) or Bitcoin (BTC) on their account. This can be a more secure option for traders who are more concerned with maintaining control over their positions and avoiding the risk of exchange-related liquidations.

While cross margin can be a powerful tool for increasing trading leverage and potential profits, it also comes with additional risks. By understanding the differences between cross margin and isolated margin on Binance, traders can make more informed decisions about the risk they are willing to take and choose the option that best suits their trading style and risk tolerance.

In conclusion, isolated margin is a more secure option for those traders who want to maintain full control over their positions and avoid the risk of exchange-related liquidations. However, it may not be as advantageous for those traders seeking to leverage their positions heavily to maximize profits.