Cross Margin Trading is a leverage trading mode that pools all account assets into a single margin pool, utilizing cross-collateralization for risk management and capital allocation. Compared to Isolated Margin Trading, it offers higher capital efficiency and greater trading flexibility. However, losses from one trade can affect all positions in the account, making diligent risk management and capital monitoring essential.

How Cross Margin Works

Cross Margin integrates the total value of all assets in an account to calculate the Margin Ratio, defined as:

Margin Ratio = Total Asset Value / Total Liabilities

  1. When the Margin Ratio falls below the platform’s Margin Call Threshold, users are required to add funds. 

  2. If it further drops below the Liquidation Threshold, the system triggers a Liquidation, automatically selling positions to repay borrowed funds, potentially resulting in the loss of all assets.

👇The following simulated case (excluding fees and interest for simplicity) illustrates how Cross Margin operates.

 

Case Study: Cross Margin Trading Simulation

Day 1, User A conducts trading using a leverage account with the following parameters:

Item

Value

Account Margin

4,000 USDT

  

Leverage

3 X

  

Borrowed Funds (Total Liabilities)

8,000 USDT

  

Trading Pairs

ETH/USDT

BCH/USDT

Initial Prices

2,000 USDT

2,000 USDT

Trading Quantity

3 ETH

3 BCH

Position Value

6,000 USDT

6,000 USDT

Total Position Value

12,000 USDT

  

Initial Margin Ratio

12,000 / 8,000 = 1.5

  

  • 💡User A uses 4,000 USDT of their own capital, borrows 8,000 USDT, and allocates a total of 12,000 USDT to purchase 3 ETH and 3 BCH, resulting in an initial Margin Ratio of 1.5.

 

Market Changes and Margin Ratio Fluctuations

Day 2: Market Divergence

Conditions：

ETH/USDT

Rises to 2,300 USDT

BCH/USDT

Falls to 1,550 USDT

 

Calculate as：

Total Asset Value: (2,300 × 3) + (1,550 × 3) = 6,900 + 4,650 = 11,550 USDT

Margin Ratio: 11,550 / 8,000 = 1.44375

 

  • 👉 The ratio remains above the assumed Margin Call Threshold (1.16), so the account stays within the safe range for continue normal trading.

 

Day 3: Significant BCH Decline

Conditions：

ETH/USDT

Falls to 2,200 USDT

BCH/USDT

Drop further to 850 USDT

 

Calculate as：

Total Asset Value: (2,200 × 3) + (850 × 3) = 6,600 + 2,550 = 9,150 USDT

Margin Ratio: 9,150 / 8,000 = 1.14375

  • 👉If the margin ratio falls below the Margin Call Threshold (1.16), a 「Margin Call」 is triggered. Without additional funds, further price declines pushing the ratio below the Liquidation Threshold (1.1) will prompt a 「Liquidation」.The system will sell positions to repay borrowed funds, potentially resulting in a complete loss of assets.

Applications and Risk Considerations for Cross Margin

Applications

Cross Margin is suitable for traders with larger capital pools who seek flexible asset allocation, as it maximizes the use of all funds in the account to enhance leverage efficiency.

Risk Considerations

Since all positions share the same margin pool, price fluctuations in a single asset can affect the entire account’s Margin Ratio, amplifying loss risks. Recommendations include:

  1. Monitor and track risk in real-time.

  2. Implement stop-loss mechanisms to limit potential losses.

  3. Select appropriate leverage multiples based on market volatility.

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