What Is Cross Margin?
Cross margin uses your entire available account balance as collateral for all open positions. If one position starts losing, it draws margin from your total balance. This provides a larger buffer against liquidation but means a single bad trade can drain funds earmarked for other positions.
How Cross Margin Works
With $10,000 in your account and a $5,000 cross-margin long, the remaining $5,000 serves as additional buffer. Your liquidation price is further away than it would be with isolated margin. However, if the trade goes deeply against you, it can consume your entire $10,000 balance.
Why It Matters for Traders
Cross margin is preferred by experienced traders running correlated or hedged positions where one position's loss is offset by another's gain. It's dangerous for directional bets because a single liquidation wipes the entire account. New traders should default to isolated margin until they fully understand portfolio-level risk management.