Cross-Margin Dynamics

Cross-Margin Dynamics refers to a risk management system where the collateral from all open positions in an account is pooled to support those positions. Unlike isolated margin, where each position has a specific amount of collateral, cross-margin allows profits from one trade to offset losses in another.

This increases capital efficiency but also elevates the risk of a single losing position liquidating the entire account. Traders must carefully manage their overall portfolio exposure, as the failure of one asset can cascade into the liquidation of unrelated assets within the same account.

It is a common feature in centralized and decentralized derivative exchanges.