# Cross Margin Architecture ⎊ Area ⎊ Resource 2

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## What is the Architecture of Cross Margin Architecture?

Cross margin architecture allows a trader's entire collateral balance to be shared across multiple open positions. This design provides greater capital efficiency compared to isolated margin systems. The system automatically reallocates margin from profitable positions to cover losses in unprofitable ones, preventing premature liquidation of individual trades.

## What is the Collateral of Cross Margin Architecture?

In this model, the entire portfolio serves as a single pool of collateral. The platform calculates the total margin requirement based on the net risk of all positions. This approach enables traders to leverage their assets more effectively, but also increases the risk exposure of the entire portfolio to a single liquidation event.

## What is the Risk of Cross Margin Architecture?

While offering efficiency, cross margin introduces systemic risk to the entire account. A significant loss in one position can deplete the entire collateral pool, leading to the liquidation of all open positions simultaneously. Traders must carefully manage their overall portfolio risk rather than focusing on individual trade parameters.


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## [Decentralized Settlement](https://term.greeks.live/term/decentralized-settlement/)

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**Original URL:** https://term.greeks.live/area/cross-margin-architecture/resource/2/