Margin Ratio and Liquidation in Isolated vs. Cross Margin Modes

Isolated Margin Mode

Overview

In Isolated Margin mode, each position has its own assigned margin, which is not shared with other positions or the account balance. If a position is liquidated, only the margin allocated to that specific position is affected, and the rest of the account remains intact. This structure caps the maximum loss for each position to the amount of margin allocated.

Margin Ratio (MR) Formula

In Isolated mode, liquidation is determined by the margin ratio (MR) for each individual position. The MR is calculated as:

MR = {MA + UPnL}{CPV} - CloseFeeRate

Where:

MA (Margin Amount): Initial margin allocated to the position
UPnL: Unrealized Profit and Loss = (RP - EP) * S * V
- RP: Representative Price (Mark Price or Last Price)
- EP: Entry Price
- S: Position Side (1 for Long, -1 for Short)
- V: Volume
CPV (Current Position Value) = RP * V
CloseFeeRate: Fee rate applied upon closing/liquidation

Liquidation Rule

Each trading pair has a system-defined Minimum Margin Ratio (MMR) depending on position size. If MR drops below the MMR, the position is forcibly liquidated.

Cross Margin Mode

Overview

In Cross Margin mode, all open positions share a common pool of funds (your wallet balance). Unrealized profits and losses from all positions impact one another. A profit from one position can offset losses from another, and vice versa. This structure improves capital efficiency, but introduces systemic risk – a large loss from one position may affect your entire account.

Margin Ratio (MR) Formula

MR = \frac{WB + UPnL - OPVM}{APV} - CloseFeeRate

Where:

WB (Wallet Balance): Available balance in the account
UPnL: Total Unrealized PnL across all positions:

UPnL = \sum_{i=1}^{n} (RP_i - EP_i) * S_i * V_i

OPVM (Other Position Value Minimum):

OPVM = \sum_{j \neq i} RP_j * V_j * MMR_j

APV (All Position Value):

APV = \sum_{i=1}^{n} RP_i * V_i

Where:

RP_i: Mark Price or Last Price of position i
EP_i: Entry Price
S_i: 1 for Long, -1 for Short
V_i: Volume

Liquidation Rule

The account will be liquidated if MR drops below MMR for any position. The liquidation sequence typically involves:

Cancelling open orders
Partially liquidating high-risk positions
Full liquidation if risk persists

Example Scenarios

✅ Example 1: Position is maintained (MR > MMR)

Mode: Isolated

Coin Pair: E-ETH-USDT (Long)

Volume: 1 contract

Entry Price (EP): 2507 USDT

Current Price (RP): 2502 USDT

Initial Margin (MA): 222 USDT

Close Fee Rate: 0.0005

Calculation:

UPnL = (2502 - 2507) * 1 * 1 = -5
CPV  = 2502 * 1 = 2502
MR = (222 - 5) / 2502 - 0.0005 ≈ 0.0866

Assuming MMR = 0.005 → MR > MMR → Position is safe.

❌ Example 2: Position is liquidated (MR < MMR)

Mode: Cross

Wallet Balance: 9500 USDT

Position 1: BTC Long (10 contracts @ 63000 → 66000)

Position 2: ETH Long (80 contracts @ 2900 → 3300)

Close Fee Rate: 0.0005

Calculation:

UPnL = (66000 - 63000) * 10 + (3300 - 2900) * 80 = -2000
OPVM = BTC MMR + ETH MMR = 3300 * 80 * 0.005 = 1320
APV = 66000 * 10 + 3300 * 80 = 924000
MR = (9500 - 2000 - 3300) / 924000 - 0.0005 ≈ 0.0040

Assuming MMR = 0.005 → MR < MMR → Position is liquidated.

Summary

Isolated Margin: Risk is contained per position. Margin and losses do not affect other trades.
Cross Margin: Efficient but riskier. Positions share profits/losses and can lead to cascading liquidation.
Always monitor MR and compare it against the MMR defined by the system.
When MR approaches 100% of MMR, prepare to reduce risk, add margin, or exit positions.

Understanding and monitoring MR in real time is critical to avoiding liquidation and maintaining trading stability.