Isolated Margin Protocols

Isolated margin protocols restrict the collateral used for a position to a specific, pre-defined amount. If the position incurs losses, only that specific collateral is at risk, preventing the rest of the trader's portfolio from being impacted.

This provides a clear boundary for risk, making it easier to calculate the exact liquidation price for an individual trade. It is a preferred method for traders who want to compartmentalize their risk across different strategies or assets.

While it offers more control, it can also lead to more frequent liquidations if the isolated collateral is insufficient to cover temporary price swings. It is a foundational tool for disciplined risk management.