Introducing Cross Margin for Crypto Futures Trading on CoinDCX

What is Cross Margin?

Cross margin on CoinDCX is an advanced futures trading tool that allows you to use your entire futures account balance to support your open positions. This means all available funds, including profits from existing positions, contribute to futures margin requirements. Unlike isolated margin, where each position has its own dedicated margin, cross margin pools your entire account balance, offering a more integrated approach to margin management.

How is Cross Margin Different from Isolated Margin?

In isolated margin trading, each position operates with its own separate margin, which limits the potential impact on your overall account balance. For instance, if you have multiple positions with isolated margins, a loss in one position does not affect the margin of another position directly, but only impacts the specific isolated margin of that trade.

In contrast, cross margin consolidates your margin across all open positions in your futures wallet. This integrated approach allows for a shared margin pool, where profits from one position can help cover the margin requirements of another. Consequently, cross margin can provide greater flexibility and resilience, as it allows your available margin to adjust dynamically with profits and losses from different positions.

Read more: Futures Wallet Feature Now on CoinDCX App

1. Margin Available to Trade

The margin available for trading is a critical differentiator between isolated margin and cross margin modes in futures trading on CoinDCX. Cross margin allows you to utilize the unrealized profits from cross positions to take more cross margin trades or adjust your existing cross margin positions. Let’s delve into the specifics with detailed examples and formulas.

The formula to calculate the available margin for trading for both isolated and cross margin modes is mentioned below:

Available to Trade (Isolated margin mode) = Futures Wallet Balance − Margin locked in Open Positions/Orders – Unrealised Losses in Cross Positions 

Available to Trade (Cross margin mode) = Futures Wallet Balance − Margin locked in Open Positions/Orders + Unrealised P&L in Cross Positions

Let’s take a few scenarios to understand this in more detail.

Scenario 1:

Let’s say your Futures wallet balance is $1000 and you take a cross margin futures trade in BTCUSDT with a margin of $200. Let’s say you make a profit of $100 on your cross position. In this case your available to trade becomes – 

Available to Trade (Isolated margin mode) = $1000 − $200 = $800

Available to Trade (Cross margin mode) = $1000 − $200 + $100 = $900

Cross margin mode allows the user to utilize the unrealised profits from the cross positions to take more cross margin trades.

Scenario 2:

Let’s say your Futures wallet balance is $1000 and you take a cross margin futures trade in BTCUSDT with a margin of $200. Let’s say you make a loss of $100 on your cross position. In this case, your available margin to trade becomes – 

Available to Trade (Isolated margin mode) = $1000 − $200 − $100 = $700

Available to Trade (Cross margin mode) = $1000 − $200 − $100 = $700

Unrealised losses in cross positions affects the available margin for trading for both Isolated & Cross modes.

Scenario 3:

Let’s say your Futures wallet balance is $1000 and you take an isolated margin trade in BTCUSDT with a margin of $200. Let’s say you make a profit of $100 on your isolated position. In this case your available to trade becomes – 

Available to Trade (Isolated margin mode) = $1000 − $200 = $800

Available to Trade (Cross margin mode) = $1000 − $200 = $800

Unrealised P&L of isolated positions has no impact on Available to Trade for Isolated/Cross margin mode.

2. Margin Management

The way margin is locked and utilized in isolated margin versus cross margin modes significantly impacts how traders manage their positions and risk. Let’s explore the detailed differences with examples and formulas.

Isolated Margin

In isolated margin mode, the locked margin is the only amount funding a specific position. This margin is isolated from the rest of the trader’s balance and cannot be used for other positions. The formula for the locked margin in isolated mode is straightforward:

Locked Margin (Isolated) = Margin allocated to the specific position

Let’s say your Futures wallet balance is $1000 and you take an isolated margin trade in BTCUSDT with a margin of $200 and another isolated margin trade in ETHUSDT with a margin of $100.

For each position, the locked margin is dedicated solely to that position:

Locked Margin for BTCUSDT position = $200

Locked Margin for ETHUSDT position = $100

The total locked margin for these positions would be $300, but each amount is only available to fund its respective position, ensuring that losses are contained within each position.

Position Management: Traders can manage and adjust the margin for each position independently, providing precise control over risk exposure.

Cross Margin

In cross margin futures mode, the total wallet margin collectively funds all cross margin positions. This includes the futures wallet balance & unrealized Cross PnL. Any margin locked in isolated positions or open orders is excluded. The formula to calculate the total cross margin is:

Total Cross Margin = Futures Wallet Balance − Margin Locked in Open Positions − Margin Locked in Open Orders + Net Unrealized Cross Margin PnL 

Let’s say your Futures wallet balance is $1000 and you have three positions –

Position 1 – BTCUSDT isolated margin position with locked margin as $200 and an unrealized profit of $50

Position 2 – ETHUSDT cross margin position with locked margin as $100 and an unrealized loss of $150

Position 3 – SOLUSDT cross margin position with locked margin as $300 and an unrealized profit of $200

Now, applying the formula mentioned above:

Futures Wallet Balance = $1000

Margin locked in open position + open orders = $200 + $100 +$300 = $600

Net Unrealized Cross Margin PnL = -$150 + $200 = $50

Total Cross Margin = $1000 − ($200 + $100 +$300) + (-$150 + $200) = $450

Key points to note here –

1. Here, the total cross margin of $450 collectively funds all cross margin positions, meaning that any profits from one cross margin position can offset losses from another cross margin position, allowing for more flexible and dynamic risk management.
2. Unrealized Profits/Losses in Isolated Positions have no impact on Total Cross Margin.

Position Management: Position management in Cross margin is done at a wallet level. You can directly Add/Remove funds from your Futures Wallet to manage the risk of your cross margin positions.

3. Liquidation

The liquidation process in futures trading significantly differs between isolated margin and cross margin modes. Understanding these differences is crucial for managing risk.

Isolated Margin

In isolated margin mode, each position has a set liquidation price. The liquidation price is the price at which the margin locked in that specific position is insufficient to cover the losses, leading to the forced closure of the position. This liquidation price is mentioned for all isolated margin position cards on the CoinDCX app.

Cross Margin

In cross margin mode, the concept of a maintenance margin ratio is used instead of a set liquidation price for each position. The maintenance margin is the minimum amount of margin required to keep all cross positions open. If the total cross margin falls below this level, the positions are at risk of liquidation.

Cross Margin Ratio = Maintenance Margin​ / Total Cross Margin 

• Maintenance Margin: The minimum margin required to maintain all open positions.
• Total Cross Margin: The total margin available across all cross margin positions, as explained in the previous section.

Thus as a thumb rule, the smaller the cross margin ratio – the safer your cross margin positions are. When the cross margin ratio hits 100%, it indicates that the total margin is insufficient to maintain the positions, and the positions will be liquidated.

4. Risk

Risk management is a critical aspect of trading, and the approach to handling risk varies significantly between isolated margin mode and cross margin mode. Understanding these differences is essential for traders to make informed decisions and protect their investments.

Isolated Margin

In isolated margin mode, the risk is confined to the margin allocated to each specific position. This means that only the funds designated as the margin for a particular position are at risk. The rest of the funds in the trader’s account remain unaffected by the performance of that isolated position.

Cross Margin

In cross margin mode all positions share the same pool of funds which includes the entire Futures Wallet Balance and any unrealized cross position P&L. Given that all positions draw from the same margin pool, and losses in one position can impact the entire account. Significant losses in one position can lead to the liquidation of other positions. Hence, in the event of liquidation, the entire Futures wallet balance can be lost.

Which Mode is Good for Me?

Choosing between cross margin mode and isolated margin mode depends on your trading strategy and risk tolerance. Cross margin is suitable for slightly advanced traders who prefer a unified approach, allowing profits from one position to support others. Isolated margin might be better for those who want to contain risk to individual positions, avoiding the impact on their overall account balance. Assess your trading style and risk appetite to determine which margin mode aligns with your objectives.

Conclusion

CoinDCX’s introduction of cross margin trading represents a significant advancement for experienced traders seeking more flexible and efficient margin management. By leveraging your entire account balance you can optimize your trading strategy and better navigate market volatility. Whether you are an advanced trader or exploring new margin options, the cross margin feature on CoinDCX provides a powerful way to enhance your trading experience.