Spot and futures cross margin mode is an advanced trading feature that allows users to share margin across different positions within a single-currency account. This guide explains its core principles, trading rules, and position management strategies to help you navigate this powerful tool effectively.
How Cross Margin Trading Works
Cross margin trading enables both tokens in a trading pair to serve as margin for opening long or short positions. This provides greater flexibility compared to isolated margin modes.
For instance, with a BTC/USDT pair, you can choose either BTC or USDT as your margin currency to open leveraged positions. This mode aggregates your account equity, allowing it to serve as collateral for multiple positions simultaneously.
Key Position Metrics Explained
When trading in cross margin mode, several metrics help you monitor your positions:
- Assets: The amount of positive assets in your position, excluding margin.
- Available Asset: The amount of positive assets available for closing a position. This varies based on your account equity and position type.
- Liability: Your total borrowing, calculated as initial liabilities plus deducted interest. For long positions, liability is in the quote currency; for short positions, it's in the trading currency.
- Interest: Accrued interest that hasn't been deducted yet.
- Average Open Price: The weighted average price of your position, calculated based on your original holding amount and any new additions.
- Estimated Liquidation Price: The indicative price at which your position would face liquidation. Note: This cannot be calculated when options positions or non-USDT margin pairs exist in single-currency mode, or when contracts with different underlyings are present in USDT mode.
- P&L: Your unrealized profit or loss, calculated differently depending on your position type and margin currency.
- P&L Ratio: Your profit or loss divided by the initial margin.
- Initial Margin: The required margin to open your position, determined by your leverage and the specific position configuration.
- Maintenance Margin: The minimum equity required to keep your position open, calculated using maintenance margin ratios.
Opening Positions in Cross Margin Mode
The fundamental principle of cross margin mode is that both currencies in a trading pair can serve as margin for your positions.
Practical Example: Long Position with BTC Margin
Consider opening a long position of 1 BTC with 10x leverage using BTC as your margin currency:
- You need 0.1 BTC as margin (your available equity must be ≥ 0.1 BTC)
- At a fill price of 10,000 USDT/BTC, you borrow 10,000 USDT
- No borrowing occurs until the transaction is filled, though your margin is placed on hold
After filling, your position shows:
- Total assets: 1 BTC
- Liability: 10,000 USDT
- Your 0.1 BTC margin remains in your account balance (unlike isolated margin where it transfers to the position)
This approach allows for more efficient capital utilization across your trading portfolio. For those looking to implement these strategies, you can explore advanced margin trading tools designed for cross-market efficiency.
Closing Positions: Strategies and Methods
Closing positions in cross margin mode follows specific rules that differ based on whether your position assets and margin currencies match.
Same Currency Scenario (Position Assets = Margin Currency)
When your position assets and margin currency are identical (using trading currency as margin for long positions or quote currency for short positions):
Available Asset Calculation:
The available asset for closing depends on your account equity relative to initial margin requirements:
- When coin equity ≥ initial margin: Available asset = (|liability + interest|) × (1 + IMR%) / mark price
- When coin equity < initial margin: Available asset = (|liability + interest|) × (1 + MMR%) / mark price
Closing Methods:
- Market Close All: Sells at market price to pay off liabilities, with remaining assets transferring to your single-currency account balance
- Limit Price Closing: Allows setting specific prices for partial or full position closure
- Reduce Only: Closes only the specified position without opening counter-positions
- Reduce + Reverse: Pays off liabilities first, then uses remaining assets to open reverse positions
Different Currency Scenario (Position Assets ≠ Margin Currency)
When your position assets and margin currency differ (using trading currency as margin for short positions or quote currency for long positions):
Available Asset Calculation:
The available asset for closing equals your position assets.
Closing Methods:
- Market Close All: Sells all position assets at market price, using account equity to cover any remaining liabilities
- Limit Price Closing: Sells position assets at specified prices until position is fully closed
- Reduce Only + Reverse Position: Closes current position first, then uses remaining assets to open reverse positions
Risk Management Considerations
Cross margin trading offers capital efficiency but requires careful risk management:
- Liquidation Risk: Since margin is shared across positions, one underperforming position can affect others
- Interest Costs: Borrowed assets accrue interest, impacting overall profitability
- Price Volatility: Rapid price movements can quickly change your risk exposure
- Margin Requirements: Understanding initial and maintenance margins is crucial to avoid unexpected liquidations
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Frequently Asked Questions
What is the main advantage of cross margin mode?
Cross margin allows more efficient use of capital by sharing margin across multiple positions. This enables greater flexibility and potentially higher returns on capital, though it also increases interconnected risk between positions.
How does liquidation work in cross margin mode?
Liquidation occurs when your total account equity cannot cover the maintenance margin requirements across all positions. The system will attempt to close positions starting with the most risky until margin requirements are met again.
Can I switch between cross and isolated margin modes?
This depends on your trading platform's specific features. Some platforms allow mode switching, but this may require closing existing positions or meeting specific equity requirements.
How are interest charges calculated?
Interest is calculated based on the amount borrowed and the duration of borrowing. Rates typically vary by asset and market conditions, with charges accruing continuously until liabilities are repaid.
What happens if I don't have enough equity to cover liabilities when closing?
If your position assets are insufficient to cover liabilities when closing, your account equity will be used to cover the difference. If both are insufficient, it may trigger liquidations of other positions.
Is cross margin suitable for beginners?
Cross margin involves complex risk management and is generally recommended for experienced traders who understand leveraged trading and risk interdependence between positions.
Conclusion
Spot and futures cross margin mode offers sophisticated traders powerful tools for capital efficiency and portfolio management. By understanding the position metrics, opening procedures, and closing mechanisms, you can better utilize this feature while managing associated risks. Always ensure you fully comprehend the mechanics and risks before engaging in cross margin trading, and consider starting with smaller positions until you're comfortable with the dynamics.