Isolated Margin Systems

Isolated margin systems restrict collateral to a single position, preventing the risks of one trade from affecting others. If the position hits its maintenance margin, only that specific trade is liquidated, leaving the rest of the account untouched.

This provides a safety mechanism for traders who want to compartmentalize their risk and prevent a single bad trade from cascading into a full portfolio liquidation. While safer for individual positions, it is less capital-efficient than cross-margining because capital cannot be shared.

Traders often use isolated margin for speculative bets where they want to strictly limit their downside exposure. It is a common feature on many crypto derivatives exchanges, offering a trade-off between control and efficiency.