What is Isolated Margin?
Isolated Margin is a powerful risk management tool that gives traders precise control over their trading positions. By allowing you to allocate a specific amount of margin to individual positions, it acts like creating sub-accounts for different trades. This separation isolates risk so one position won’t affect your other trades, providing a safety net for your overall trading portfolio.
Key Features and Benefits
Isolated margin on BSX comes with several features designed to enhance your trading experience. The system allows for individual margin allocation per position, with the flexibility to adjust margin amounts for positions as needed.
A significant advantage is protection against large swings in positions when trading in cross-margined mode where volatility in certain assets can cause liquidations on a traders whole portfolio. While cross margin remains the default setting for optimal capital efficiency, traders can choose to switch to isolated margin for specific positions that require more careful risk management.
Isolated Margin in Practice
The Conservative Trader
Consider Alice, who has 2,000 USDC in her trading account and wants to trade BTC with leverage. She opens a BTC long position worth 1,000 USDC with 10x leverage but only wants to risk a portion of her capital. By using isolated margin mode, she can place 100 USDC as margin where even in the worst-case scenario (liquidation), she can’t lose more than the margin she has posted for this position. The remaining 1,900 USDC she has in her portfolio is protected
Multi-Asset Trading
Bob's trading strategy involves both ETH and SOL. He chooses to use cross margin for his ETH trading while setting isolated margin for his riskier SOL trades. This setup means that if his SOL position gets liquidated, his ETH position remains completely unaffected. This flexibility allows him to implement different risk management strategies for different assets within the same account.
Position Management
Alice’s BTC position demonstrates the dynamic nature of isolated margin. When her position with an original isolated margin of 100 USDC approaches liquidation, she can add additional margin to prevent liquidation. This ability to adjust margin on the fly allows her to maintain her position without putting her entire account balance at risk.
Important Trading Guidelines
BSX implements a one-position-per-product rule, meaning you can only be either long or short on a single product. Before switching between margin modes, all positions and orders must be closed.
When to Use Isolated Margin
Isolated margin proves most valuable when testing new trading strategies or dealing with volatile assets. It's particularly useful for traders who want to maintain strict risk management while exploring multiple positions.
The system allows for better portfolio organization and provides peace of mind during volatile market conditions. However, remember that while isolated margin offers better risk control, it may require more active management compared to cross margin trading.
Getting Started
Starting with isolated margin is straightforward but requires careful consideration. Begin by selecting your trading pair and choosing isolated margin mode before opening any position. Set your desired margin amount based on your risk tolerance and trading strategy. Regular monitoring and adjustment of your positions ensure optimal risk management.
Risk Management Tips
Start with smaller positions to understand the system
Regularly monitor your positions
Keep additional funds ready for margin adjustments
Understand liquidation prices and mechanisms
Don't risk more than you can afford to lose
Looking Ahead
BSX's implementation of Isolated Margin represents a significant step forward in providing traders with sophisticated risk management tools. The platform's hybrid approach, allowing both isolated and cross margin trading, gives traders the flexibility they need while maintaining robust risk management capabilities. As we continue to develop and enhance our trading features, our focus remains on providing the best possible trading experience while prioritizing user security and control.
About BSX
BSX is a leading cryptocurrency derivatives exchange committed to providing innovative trading solutions. With features like Collateral Swap, we continue to push the boundaries of what's possible in crypto trading.
Are you building on Base, managing trading groups, or want to write about BSX? Please reach out for collaboration: marketing@bsx.exchange
