Isolated margin creates a boundary
Only the collateral assigned to an isolated position supports it. Adding or removing margin changes that position's liquidation distance without directly drawing on unrelated balances.
Cross margin shares support
Cross margin uses eligible account equity across positions. Profits in one position can support losses in another, but one large loss can reduce the safety of the entire account.
The safer mode depends on the objective
Isolated margin can make maximum assigned loss easier to reason about. Cross margin can be useful for offsetting portfolios and active management. Neither removes the need for position sizing.
The boundary determines how stress propagates
Isolated margin assigns a dedicated resource to a position, limiting how much other account equity automatically supports it. Cross margin pools support across eligible positions, which can delay one liquidation but also allows one loss to consume collateral relied on elsewhere.12
Cross margin is not diversification. Correlated positions can lose together, and profits that appeared to support the account can reverse. Stress the account as a portfolio and check whether open orders reserve additional margin.2
Two failure modes to compare
In isolated margin, a sound account can still lose the full amount assigned to one poorly sized position because unused collateral does not automatically support it. In cross margin, a loss can remain open longer but consume equity intended for unrelated positions and orders.12
Choose the boundary based on the intended failure containment. Then set a position-level exit and an account-level limit because neither margin mode replaces active risk control.