There are two different ways your margin, the money backing a leveraged position, can be applied, and the choice determines exactly how much of your balance is at risk if a single trade goes wrong.
Isolated margin
With isolated margin, you assign a fixed amount to one specific position, and that amount is the absolute limit of what you can lose on it.
Say you have $1,000 in your account. You open a position with $100 set aside as isolated margin. If that position is liquidated, you lose the $100. The other $900 was never touched, it was never part of that position to begin with.
This makes the worst case on any single trade knowable the moment you open it. Whatever you assigned is the ceiling, nothing more can come out of that position, however badly it moves.
Cross margin
With cross margin, your entire available balance stands behind every open position at once, not just one. If a position starts losing, the system can draw on the rest of your balance to keep it open longer, provided your total balance can still cover it.
Take the same $1,000, now spread across three open positions under cross margin. If one of them is losing, the other funds in your account can absorb some of that loss and delay or prevent liquidation on it, right up until your combined balance is no longer enough.
That extra room comes from somewhere, though. A large loss on one position can now draw down money that would otherwise have been protecting your other positions, since everything is sharing the same pool.
What this actually costs you if it goes wrong
With isolated margin, a bad trade costs you exactly what you assigned to it, and nothing you have elsewhere is affected. With cross margin, a bad trade can cost you more than what you’d think of as “that position’s money,” because your other funds are standing behind it too, and a big enough loss can pull all of it down together.
Neither one is the cautious choice and neither is the reckless one. Isolated margin trades away some resilience for a known, capped ceiling. Cross margin trades away that cap for a position that can absorb more before it’s forced closed.
Choosing between them
Isolated margin tends to suit anyone running several separate positions and wanting each one’s worst case fixed and known in advance, and it’s usually the more sensible starting point while you’re still building a feel for how positions move.
Cross margin tends to suit someone running fewer positions they have real conviction in, where they’d rather let their full balance support a trade through a rough patch than risk it being closed out early on a temporary move.
Either way, the setting is yours to choose deliberately, not something to leave on a default without knowing what it means.
Where to go next
So far, every price used in these examples has just been “the price.” In practice, a position tracks more than one number at once, and knowing which one actually determines your liquidation matters.