Position Segregation

Position segregation is the practice of keeping the assets and risk profile of one position completely separate from others. This is the core principle behind isolated margin accounts.

By isolating positions, a trader ensures that a disaster in one trade does not cascade into the rest of their portfolio. This provides a clear framework for risk management, as the trader knows exactly how much capital is at stake for each individual position.

It is particularly useful when trading assets with high volatility or when testing new trading strategies. Many decentralized exchanges offer both cross-margin and isolated margin options to cater to different risk appetites.

Segregation reduces the systemic risk of the individual trader's portfolio. It is a foundational concept for secure and predictable derivative trading.