What is the difference between isolated margin and cross margin on Bybit?

Understanding Margin Types on Bybit

When trading on Bybit, users have access to two primary margin modes: isolated margin and cross margin. These modes determine how margin is allocated and managed within a trading position. Understanding the distinction is essential for effective risk management and capital utilization. Both modes apply to perpetual contracts and futures trading, where leverage amplifies both gains and losses.

The fundamental difference lies in how collateral is assigned to open positions. In isolated margin, the trader sets a fixed amount of margin specifically for a single position. This means the maximum loss is limited to that allocated margin, and liquidation occurs when the loss reaches this predefined amount. In contrast, cross margin uses the entire available balance in the wallet as potential collateral for all open positions, dynamically adjusting the margin based on equity.

How Isolated Margin Works

In isolated margin mode, each position operates independently with its own dedicated margin. This allows traders to precisely control risk exposure per trade. To set up isolated margin on Bybit:

• Navigate to the trading interface for the desired contract.
• Locate the margin mode selector, usually near the leverage settings.
• Click to switch from cross to isolated margin.
• Enter a specific margin amount for the position.
• Adjust leverage independently for each position.

Once configured, the system will only use the specified margin to maintain the position. If the market moves against the trade and the maintenance margin threshold is breached, the position will be liquidated based on the isolated margin balance. This prevents losses from spilling over into other positions. Traders can manually add or reduce margin to the isolated position at any time through the interface.

A key advantage of isolated margin is predictability. Since the risk is capped at the allocated margin, traders can design strategies with precise risk-reward ratios. However, improper margin allocation—such as setting too little margin—can lead to premature liquidation during volatility.

How Cross Margin Mode Functions

Cross margin operates by pooling all available equity in the wallet to support open positions. This means the system automatically draws from the total balance to prevent liquidation. To enable cross margin:

• Open the contract trading panel.
• Click on the margin mode toggle.
• Select cross margin from the options.
• Confirm the change, which applies to the current position.

When using cross margin, the effective leverage is calculated across all positions. The platform uses the entire wallet balance as a buffer, reducing the likelihood of liquidation during short-term price swings. For example, if one position is under margin pressure, unrealized profits from other positions can help sustain it.

However, this interconnectedness introduces systemic risk. A sharp adverse move across multiple positions can deplete the entire account balance. Unlike isolated margin, there is no fixed cap on loss per trade. The liquidation price in cross margin adjusts dynamically as the wallet balance changes due to PnL fluctuations.

Cross margin is particularly useful for hedging strategies or when managing a portfolio of correlated assets, as it maximizes capital efficiency. Still, it requires constant monitoring because the use of total equity as collateral increases exposure.

Key Differences in Risk and Liquidation

The liquidation mechanism differs significantly between the two modes. In isolated margin, liquidation occurs when the mark price reaches the level where the allocated margin can no longer cover the maintenance requirements. The formula for liquidation price depends only on entry price, leverage, and the fixed margin amount.

In cross margin, the liquidation price is influenced by the total equity in the account. As unrealized PnL from other positions changes, the effective margin supporting a trade shifts. This means the liquidation price is not static and can improve or worsen in real time.

Another critical difference is loss containment. With isolated margin, losses are confined to the designated margin for that trade. In cross margin, losses can consume the entire wallet balance if multiple positions move against the trader simultaneously.

Traders who prioritize capital preservation often prefer isolated margin for its compartmentalized risk. Conversely, those seeking maximum flexibility and willing to accept broader exposure may opt for cross margin.

Switching Between Margin Modes on Bybit

Bybit allows users to switch between isolated and cross margin modes, but certain conditions apply. To change the mode:

• Ensure there are no active orders or open positions on the contract.
• Cancel all pending orders manually.
• Access the margin mode selector on the trading interface.
• Choose the desired mode: isolated or cross.
• Confirm the change.

If a position is already open, the mode cannot be changed until the position is closed. However, traders can adjust margin within the current mode. For isolated positions, additional margin can be added to lower the liquidation risk. In cross margin, while direct margin assignment isn't possible, depositing more funds increases the total equity buffer.

It is important to note that switching modes affects leverage settings. Isolated margin allows per-position leverage customization, while cross margin applies leverage relative to total equity usage.

Practical Use Cases and Strategy Implications

Traders using high-frequency scalping strategies often benefit from isolated margin because each trade is risk-controlled independently. Allocating a fixed margin per trade ensures consistent risk exposure, regardless of account size fluctuations.

For portfolio traders managing multiple correlated positions—such as long BTC and short ETH—cross margin can be more efficient. The shared equity pool helps absorb temporary drawdowns in one position using gains from another.

Risk-averse traders typically use isolated margin to enforce strict position sizing rules. By defining the maximum loss upfront, they avoid emotional decision-making during volatile markets.

On the other hand, experienced traders with strong risk monitoring systems may use cross margin to avoid premature liquidations during high volatility, relying on their ability to react quickly to margin calls.

Frequently Asked Questions

Can I change margin mode while having an open position on Bybit?No, you cannot switch between isolated and cross margin modes if you have an open position or active orders. You must close the position and cancel all orders before changing the margin mode.

Does cross margin increase my leverage automatically?No, cross margin does not automatically increase leverage. Leverage is set manually. However, because cross margin uses total equity, the effective buying power may appear higher, but the leverage ratio remains user-defined.

What happens to my isolated margin if I don't add enough for maintenance?If the margin in an isolated position falls below the maintenance margin requirement due to price movement, the system will initiate liquidation of that position only. Other positions remain unaffected.

Is it possible to use both margin modes on different contracts simultaneously?Yes, Bybit allows you to use isolated margin on one contract and cross margin on another at the same time. Each contract's margin mode is configured independently in the trading interface.