Global HibtHub Contract Position Mode Guide
Common Contract Position Modes
The two most common contract position modes are Cross Margin and Isolated Margin. These are two different margin systems that are widely supported by cryptocurrency trading platforms.
The Difference Between Isolated Margin and Cross Margin
What Is Isolated Margin?
In Isolated Margin mode, the amount of margin allocated to a specific position is limited. This means that users can decide how much of their funds to allocate as collateral for a particular position, while the remaining funds in the account are not affected by that trade.
For example, suppose your account balance is 10 BTC. You believe that the price of Ethereum (ETH) will increase, so you decide to open a leveraged long position on ETH. You allocate 2 BTC as isolated margin with 5x leverage. This means you are effectively trading 10 BTC worth of ETH (2 BTC of your own funds + 8 BTC borrowed through leverage).
If the price of ETH rises and you close your position, all profits will be added to the initial 2 BTC margin allocated to that trade.
However, if the price of ETH drops sharply, the maximum amount you can lose is the 2 BTC allocated as isolated margin. Even if your position is liquidated, the remaining 8 BTC in your account will not be affected. This is why it is called Isolated Margin.
What Is Cross Margin?
Cross Margin uses all available funds in your account as collateral for all open positions. If one position incurs a loss while another generates a profit, the profit from the winning position can be used to offset the loss, helping to keep your positions open for a longer period.
Let's look at an example.
Suppose your account balance is 10 BTC. Under Cross Margin mode, you open a leveraged long position on ETH and a leveraged short position on another cryptocurrency, Z. You trade 4 BTC worth of ETH and 6 BTC worth of Z, both with 2x leverage. Your entire 10 BTC account balance serves as collateral for both positions.
If the price of ETH falls, causing a potential loss, while the price of Z also falls, generating a profit on your short position, the profit from the Z trade can offset the loss from the ETH trade, allowing both positions to remain open.
However, if the price of ETH falls while the price of Z rises, both positions could incur losses. If your total losses exceed your account balance, both positions may be liquidated, and you could lose your entire 10 BTC account balance.
This is significantly different from Isolated Margin, where your maximum loss is limited to the 2 BTC allocated to the specific position.
Please note that the simplified examples above do not include trading fees or other associated costs. Actual trading scenarios are typically much more complex.
Which Position Mode Does Global HibtHub Contracts Use?
Global HibtHub Contracts use the Cross Margin mode. This means that all funds in your contract account will serve as margin collateral for your open contract positions.