What Is Isolated Margin?

Isolated margin is the reason one bad trade stays one bad trade.

Each leveraged position gets its own pot of collateral, and only that pot is exposed if the trade goes badly wrong. The rest of your account isn't available to that position. The worst case of a single trade, liquidation, becomes a fixed, known number instead of a threat to the whole account.

This is for the trader who wants every worst case decided before entry. If you've ever opened a position without knowing how much it could take from you... this one's for you.

How does isolated margin work?

When you open a leveraged position, the platform asks how much margin to commit. In isolated mode, that margin is the only collateral backing the position. Leverage decides how much exposure that margin controls: $1,000 of margin at 10x controls about $10,000. If price moves far enough against the position to burn through that margin, the position is liquidated and the $1,000 is gone. The rest of the account is untouched.

Leverage also decides where liquidation sits. Roughly, at 10x the liquidation price is a little under 10% from entry, at 20x a little under 5%, and at 50x a little under 2%, because maintenance margin requirements pull it slightly closer.

Isolated margin is a backstop, not a stop. Your stop loss still defines the planned risk. Isolated margin defines the absolute ceiling if something goes wrong with the stop.

How do you choose leverage on an isolated margin position?

Illustrative numbers only. You want to go long ETH at $3,000. Structure puts the stop at $2,910, $90 away. With 1% risk on a $10,000 account, that's $100, so size is $100 divided by $90, or 1.11 ETH; round down to 1.1 ETH, about $3,300 of exposure.

Now choose leverage last:

• 5x isolated: about $660 of margin. Liquidation sits near 20% below entry, far beyond the $2,910 stop. If the stop is hit, you lose about $99 plus costs. The liquidation price is never in play.
• 50x isolated: about $66 of margin. Liquidation sits around 2% below entry, near $2,940, which is above your stop. Price reaches liquidation before it reaches the stop, so the stop never fires and the position closes on the platform's terms.

Same trade. Same size. Same planned risk. The only safe leverage is one that keeps liquidation price well beyond the stop. Anything else lets the platform pick your exit, right?

Why do we run isolated margin?

Because it makes the size of any single mistake a number you decided before entering. Chad's practice is plain: "Personally, again, I'm always running isolated... we always recommend just running isolated." Chad's co-founder Niko Mercuris adds why leverage still matters even with good sizing: "The higher your leverage, the closer your liquidation is to your entry."

In the Decision Protocol, margin mode and leverage are the very last settings, chosen after the stop, the size and the 1:3 filter. Isolated margin keeps each trade inside its own box, which also makes total exposure easy to read: add up the risk on each open position and you know where you stand.

Boxes you can count. That's the whole appeal.

What are the two isolated margin mistakes?

Treating isolated margin as if it were a stop. A trader opens an isolated position with no stop, reasoning that the most they can lose is the margin. True... but the margin is often far more than 1 or 2% of the account, and liquidation fees add to the cost. Use a stop for the planned risk and isolated margin as the cap behind it.

Adding margin to a losing isolated position to push liquidation further away. That quietly turns an isolated trade into a cross margin trade by hand, feeding MORE of the account into an idea the market is already rejecting. If the stop is right, let it work.

What isolated margin setting should you check before your next trade?

Confirm the margin mode says isolated, then check that your liquidation price sits well past your stop. If it doesn't, lower the leverage, not the stop.

Keep going: crypto leverage trading, crypto risk management, crypto leverage liquidation explained, leverage and margin.

Sources: the CFTC's futures glossary defines margin and maintenance margin, and Investor.gov explains that on a margin call the firm can sell your holdings without notice to cover the shortfall.