When diving into the world of leveraged trading, understanding margin modes is essential for effective risk management and maximizing potential returns. On platforms like Bybit, traders can choose between two primary margin systems: isolated margin and cross margin. These modes determine how your capital is allocated to open positions and how close you are to liquidation. This guide breaks down both models, explains their mechanics, and helps you decide which suits your trading strategy.
Understanding Leverage and Margin
Leverage and margin are foundational concepts in derivatives trading. Leverage allows traders to control larger positions with a relatively small amount of capital, amplifying both gains and losses. The capital set aside to open and maintain a leveraged position is known as margin, acting as collateral against potential losses.
The relationship between leverage and margin is inverse:
- Higher leverage means lower required margin, enabling larger position sizes but bringing the liquidation price closer to the entry point — increasing risk.
- Lower leverage requires more margin, limiting position size but providing a wider buffer against market volatility, reducing the chance of liquidation.
👉 Discover how margin modes impact your trading performance and risk exposure.
Two Margin Modes on Bybit
Bybit offers two distinct margin modes: Isolated Margin and Cross Margin. Each serves different risk appetites and trading strategies.
What Is Isolated Margin Mode?
In Isolated Margin Mode, the margin assigned to a specific position is separated from the rest of your account balance. This means only the allocated margin supports that particular trade.
Key features:
- You can manually adjust leverage for each position.
- Maximum loss is limited to the isolated margin amount (excluding fees).
- Ideal for traders who want strict risk control per trade.
Example:
A trader opens a 1,500 BTCUSD contract at $10,000 with 1x leverage, requiring 0.15 BTC as initial margin. If they increase leverage to 3x, the required margin drops to 0.05 BTC. If the position is liquidated, the maximum loss is capped at 0.05 BTC — protecting the rest of the account.
This model gives precise control over risk per trade, making it popular among disciplined traders.
What Is Cross Margin Mode?
Cross Margin Mode is Bybit’s default setting. It uses the entire available balance in the relevant currency as collateral to support open positions and prevent liquidation.
Key characteristics:
- All available funds in the asset class back your position.
- Liquidation occurs only when total equity falls below maintenance requirements.
- Losses can extend beyond a single trade — up to the full balance in that currency.
Example:
A trader holds a BTCUSDT position under cross margin. If liquidation occurs, the entire USDT balance may be wiped out — but holdings in other currencies (like BTC) remain untouched.
While this mode enhances position resilience during volatile swings, it also increases systemic risk if not managed carefully.
Can You Switch Between Margin Modes?
Yes — traders can switch between isolated and cross margin modes at any time, provided:
- There’s sufficient margin in the account.
- The change won’t immediately trigger liquidation.
Once changed, the new mode applies to:
- All open positions
- Active orders
- Conditional orders
Switching modes affects the liquidation price, so it’s crucial to monitor your risk parameters closely after adjustment.
Adjusting Leverage in Cross Margin Mode
Traders can set custom leverage in Cross Margin Mode via the order panel by sliding or typing in the desired multiple.
Default Leverage Rules:
Users registered after August 9: Default leverage is 10x for calculating initial margin.
- For BTCUSDT perpetual contracts: Initial margin = Contract value / 10
Users registered before August 9: Default uses the maximum allowed leverage under current risk limits (e.g., up to 100x for BTCUSDT at lowest risk tier).
- Initial margin = Contract value / 100
How Leverage Affects Position Size (Example):
Assume:
- Initial margin: 1,000 USDT
- Entry price: 30,000 USDT per BTC
| Leverage | Contracts Purchased |
|---|---|
| 100x | (1,000 × 100) / 30,000 = 3.333 BTC |
| 50x | (1,000 × 50) / 30,000 = 1.666 BTC |
| 10x | (1,000 × 10) / 30,000 = 0.333 BTC |
👉 See how different leverage levels affect your position size and liquidation risk.
Higher leverage allows larger positions — but also increases liquidation sensitivity.
Formula:
Contract Quantity = (Initial Margin × Leverage) / Entry Price
Does Changing Leverage Affect Liquidation Price in Cross Mode?
Not always. The impact depends on your account structure:
- Single Position, No Active Orders
→ No change in liquidation price. Position size and collateral remain constant. - Single Position with Active Orders
→ Yes, changes occur. Increasing leverage frees up margin from orders, boosting available balance and improving liquidation buffer. Decreasing leverage has the opposite effect. - Multiple Positions Sharing Same Asset (e.g., USDT-based pairs)
→ Changing leverage on one affects others. Higher leverage frees up margin for other positions; lower leverage consumes more, tightening their liquidation thresholds.
What Is Effective Leverage in Cross Margin?
Effective leverage reflects the real risk level of a position based on total exposure versus available loss capacity.
Calculations:
- With unrealized profit:
Effective Leverage = Contract Value / (Position Margin + Available Balance + Unrealized PnL) - With unrealized loss:
Effective Leverage = Contract Value / (Position Margin + Available Balance)
Where:Available Balance = Wallet Balance – Position Margin – Total Order Margin
Higher effective leverage = higher liquidation risk = liquidation price closer to mark price.
How Does Leverage Affect Unrealized PnL?
Here’s a common misconception: changing leverage does not directly affect unrealized profit or loss (PnL).
Why?
- When you adjust leverage, only the initial margin changes.
- The position quantity (QTY) stays the same.
- Therefore, unrealized PnL remains unchanged.
However:
- Unrealized PnL percentage (ROI%) does change because it's calculated relative to margin used.
- Lower margin (from higher leverage) = higher ROI% for same PnL.
ROI% Formulas:
- Isolated Mode:
Unrealized PnL % = Unrealized PnL / (Initial Margin + Close Fee + Additional Margin) × 100% - Cross Mode:
Unrealized PnL % = Unrealized PnL / (Initial Margin + Close Fee) × 100%
So while actual profit doesn’t increase with higher leverage, the percentage return appears larger due to reduced capital commitment.
👉 Learn how to optimize your ROI using smart margin strategies.
Frequently Asked Questions (FAQ)
Q: Which margin mode is safer for beginners?
A: Cross margin is often recommended for beginners because it uses the entire balance to avoid liquidation. However, this also means greater potential losses. Isolated margin offers better risk control and is preferred by those managing multiple trades independently.
Q: Can I lose more than my initial investment in isolated margin mode?
A: No. In isolated margin, your maximum loss is limited to the allocated margin (plus fees). Your other funds remain protected.
Q: Does increasing leverage increase my profits directly?
A: Not directly. Profits depend on price movement and position size. Higher leverage lets you take larger positions with less capital, which can amplify gains — but only if the market moves in your favor.
Q: Why did my liquidation price change after adjusting leverage?
A: In cross margin mode with multiple positions or active orders, changing leverage alters available balance distribution, affecting liquidation levels across positions.
Q: Is cross margin always better because it uses more funds?
A: Not necessarily. While it provides stronger support against liquidation, it ties up more capital and increases systemic risk. Over-leveraging across multiple positions can lead to total balance wipeout in extreme cases.
Q: Can I use both margin modes simultaneously?
A: Yes — you can apply isolated margin to some positions and cross margin to others, as long as they're in different trading pairs or isolated settings.
By understanding the differences between isolated vs cross margin, how leverage impacts margin requirements, and how these choices affect liquidation prices and ROI, traders can make informed decisions aligned with their risk tolerance and market outlook. Always monitor your effective leverage and available balance — especially during high volatility periods.
Core Keywords: isolated margin, cross margin, leverage trading, liquidation price, effective leverage, initial margin, maintenance margin, risk management