What Is Bitcoin Cross Mode and Isolated Mode?
Bitcoin cross and isolated refer to the order modes in Bitcoin futures trading, provided by all futures exchanges including Bybit and Binance. Depending on the trading style of the futures investor, either isolated or cross mode is used. The choice of mode can either make coin liquidation easier to occur or prevent it
Bybit Exchange’s Cross and Isolated Modes
Isolated (isolated) mode separates the margin in the futures wallet and the betting amount (margin amount), indicating a mode to trade separately.
It is the most commonly used mode, and when forced liquidation occurs, only the margin in the position is liquidated.
Isolated mode cannot prevent the risk from forced liquidation, so it’s advisable to use the stop-loss (SL) feature to minimize the risk of liquidation.
- What is Cross mode?
Cross mode is the opposite of isolated mode, using the margin in the futures wallet and the margin in the position appropriately.
For example, in isolated mode, if the liquidation price is exceeded, the position is terminated. However, in cross mode, the futures assets in my wallet are shared, so depending on how much asset is in the wallet, it’s possible to significantly lower the liquidation price standard.
However, if the futures wallet is short on assets, it means there’s not enough margin to supplement, leading to forced liquidation just like in isolated mode.
Binance Cross and Isolated mode
The popular Binance exchange operates identically to Bybit. This includes Binance cross and isolated as well as all futures exchanges like Bitget.
Changing Cross and Isolated Modes
To conclude, it is important to note that once a position is entered in either cross mode or isolated mode, it is not possible to change the mode midway.
If you want to lower the liquidation price of an existing position, you can do so by supplementing more margin, which in turn lowers the standard for liquidation price.
One downside of Binance’s cross and isolated modes is that unlike Bitget exchange, where you can lower the risk of forced liquidation in cross mode by reducing the leverage ratio or adding more margin, Binance lacks these various functions.
With an increase in coin margin rate, you can achieve the effect of significantly lowering the liquidation price. The coin margin ratio also significantly decreases as a result.
Summary of Differences Between Cross Mode and Isolated Mode
|Long term investment
|High or Middle leverage
|The most commonly chosen mode
Advantages and Disadvantages of Cross and Isolated Mode in Bitcoin Futures Trading
Isolated mode is commonly chosen for scalping, quick trades in futures, swing purposes, high leverage, and low amount orders (like 50x small amount). Its advantage lies in the fact that only the amount you ordered is liquidated when liquidation occurs, and most foreign futures exchanges do not limit the leverage limit for isolated mode (typically up to 100x to 125x, unlike cross mode in some cases).
The disadvantage of isolated mode is that you can’t do anything when liquidation occurs. To prevent liquidation in isolated mode, you can only rely on TP (Take Profit) and SL (Stop Loss) features.
Conversely, cross mode, as mentioned earlier, involves placing orders with the assets in my futures account.
The advantage of cross mode is that it utilizes the assets in my account during liquidation, preventing the order from being forcibly terminated.
The disadvantage of cross mode is that if the cryptocurrency market fluctuates too much, all assets in the futures account can be wiped out in an instant.
Also, some foreign futures exchanges only allow up to 25x leverage in cross mode or limit it to 1-2x.
Typically, cross mode is chosen for long-term investments with low leverage. For example, betting with a few million or tens of millions of won at a low leverage of 2-5x.
The lower the leverage ratio, the less the risk of liquidation, so if you’re planning to invest in futures for the long term, going with cross mode at low leverage is advisable.
Or, it can be used in futures trading with 2-3x leverage in cross mode when the investment capital is slightly insufficient, and the spot trading profit is a bit ambiguous.
In conclusion, if you have read through the content so far, you should have a perfect understanding of the differences between cross and isolated mode. To summarize once again:
- Isolated Mode: Commonly chosen for high leverage, low amount orders like quick scalping, the most typical order option.
- Cross Mode: Chosen for low leverage, high amount orders for long-term investments or holding for an extended period, usually not selected due to the risks of long-term futures trading.