What is the difference between Upbit's cross-margin and fixed-margin trading modes?

Cross-Margin vs Fixed-Margin on Upbit: Key Differences

1. In cross-margin trading, the entire available balance in a user’s margin account is used as collateral for open positions. This means that all assets contribute to maintaining the position and preventing liquidation. If one asset declines in value, others can compensate, offering a buffer against sudden market swings.

2. Fixed-margin trading restricts the collateral to only the initial amount deposited for a specific trade. No other funds in the account are at risk beyond that predefined sum. This mode gives traders tighter control over exposure but increases the likelihood of liquidation if the market moves sharply against the position.

3. Risk distribution differs significantly between the two modes. Cross-margin spreads risk across the portfolio, potentially increasing resilience during volatility. Fixed-margin isolates risk to individual trades, which can be safer for disciplined strategies but requires closer monitoring.

4. Liquidation thresholds are generally more forgiving in cross-margin because additional equity supports the position. In fixed-margin, once the initial margin falls below the maintenance level, liquidation occurs immediately without drawing from other sources.

5. Cross-margin suits traders managing multiple positions with diversified assets, while fixed-margin appeals to those prioritizing precise risk boundaries per trade.

Impact on Trading Strategy and Capital Efficiency

1. Traders using cross-margin can leverage their total holdings more efficiently. Since the system aggregates all eligible assets, they may open larger positions than would be possible under fixed-margin constraints.

2. Capital efficiency comes with increased complexity. A downturn in an unrelated asset could indirectly affect the health of an otherwise stable leveraged position due to shared collateral.

3. Fixed-margin allows for compartmentalized risk assessment. Each trade operates independently, making performance tracking and strategy adjustments more straightforward.

4. In volatile markets, cross-margin users might benefit from temporary dips being offset by stronger assets, reducing forced exits.

5. Over-leveraging becomes harder to detect in cross-margin setups. Without careful oversight, traders might unknowingly expose themselves to systemic risk across their entire margin portfolio.

User Control and Flexibility

1. With fixed-margin, users manually set the amount of collateral assigned to each trade. This offers transparency and predictability, especially useful for algorithmic or rule-based trading systems.

2. Cross-margin automatically allocates available funds, removing manual input but also limiting fine-tuned control. Users must trust the platform's mechanism to manage collateral dynamically.

3. Adjusting positions mid-trade varies between modes. In fixed-margin, changing collateral typically requires closing and reopening the position. Cross-margin adapts organically as balances fluctuate.

4. Traders who prefer hands-on management often lean toward fixed-margin, whereas those comfortable with integrated risk models favor cross-margin.

5. Fund segregation plays a role in decision-making. Fixed-margin aligns better with traders allocating specific capital pools for distinct strategies, such as long-term holds versus short-term speculation.

Frequently Asked Questions

Can I switch between cross-margin and fixed-margin after opening a position? No, the margin mode must be selected before entering a trade. Once a position is opened, the mode cannot be changed. Users need to close the current position and reopen it under the desired margin type.

Does cross-margin use all cryptocurrencies in my wallet automatically? Not all assets are included. Only those supported by Upbit’s margin program and marked as eligible collateral contribute to cross-margin positions. Stablecoins and major pairs like BTC and ETH are typically accepted.

Which mode results in faster liquidation during sharp price drops? Fixed-margin tends to liquidate faster because it relies solely on the initial deposit. Without supplementary equity from other holdings, even small adverse movements can trigger margin calls sooner than in cross-margin scenarios.

Is interest charged differently between the two modes? Interest is based on borrowed amounts, not the margin mode itself. However, since cross-margin may allow larger borrowings due to higher effective collateral, total interest costs can increase depending on usage.