Isolated Margin

When a trader opens a leveraged position, the exchange has to decide which funds back that trade if the market moves the wrong way. In isolated margin mode, the trader manually sets aside a fixed amount of collateral for one specific position, and that bucket is walled off from every other balance in the account.

Mechanically, the exchange marks the position to market continuously. As the price moves against the trade, losses eat into the isolated collateral rather than the account as a whole. Once that collateral falls to the maintenance margin level, the position is liquidated and closed, but the rest of the trader's balance and any other open trades are untouched. A trader who commits $100 as isolated margin on a $1,000 position can, at most, lose that $100 plus fees, no matter how far the price falls. Most platforms also let a trader top up the isolated margin on an existing position, which lowers the liquidation price and buys more room before a forced close.

This differs from cross margin, where the entire account balance backs every open position, so profits on one trade can offset losses on another but a severe move can put the whole account at risk. Isolated margin is generally preferred for testing a single high-leverage idea, hedging, or capping downside on a volatile altcoin, since the worst case is known in advance.

The trade-off is capital efficiency and attention: collateral sitting in an isolated bucket cannot support other positions, and because the buffer is smaller by design, a fast price swing can trigger liquidation sooner than it would under cross margin. Exchanges such as Binance and Bybit offer isolated margin as a selectable mode within their margin trading and derivatives products.