Huobi currently supports two (2) types of Margin products, Cross Margin and Isolated Margin.
1.What is Margin Trading?
Margin Trading refers to the practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan from the broker. Since such use of financial leverage can potentially magnify gains but could also saddle the trader with devastating losses, leverage has the well-deserved reputation of being a double-edged sword.
2.What is the difference between Cross Margin and Isolated Margin?
1). Cross Margin is margin that is shared across open position, using the full amount of funds in the Available Balance, thus reducing the risk of liquidation on a losing position. Any Realised PNL from other positions can aid in adding margin on a losing position.
2). Isolated Margin is margin individually set aside for an outstanding margin position, with a fixed collateral amount. If the collateral amount is not sufficient to support the loss, the position will be forced into liquidation. As such, this margin method has higher liquidation risk, but the loss is limited to a fixed collateral amount and not the entire account.
To conclude, Cross Margin provides experienced Institution and margin traders with a more sophisticated tool to manage their open positions and reduce liquidation risks.
Isolated Margin is recommended for users who are new to Margin Trading.
Risk Reminder: Investing in digital assets comes with high risks due to huge price fluctuations. Before trading, please have a full understanding of all the risks of investing in digital assets and be prudent of your own investment decisions.
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