Cross-margin leverage lets you use your entire account balance as collateral for all your trades, improving capital efficiency and balancing risks across positions. On Defx Perps DEX, a decentralized trading platform operating on Ethereum and Solana, you can trade with up to 50× leverage while maintaining control of your assets. Key benefits include lower margin requirements, the ability to offset losses with profits, and simplified portfolio management. However, it comes with risks like exposure to entire account liquidation and the need for advanced risk management.
Quick Overview:
- What It Is: Use your full account balance as collateral across all trades.
- Benefits: Lower margin requirements, risk balancing, and capital efficiency.
- Risks: Entire account liquidation and complex risk management.
- How It Works: Supports strategies like hedging and dollar-cost averaging, with tools like stop-loss orders and account health tracking.
| Feature | Cross-Margin | Isolated Margin |
|---|---|---|
| Collateral Management | Entire account balance | Position-specific |
| Risk Distribution | Across all positions | Limited to individual trades |
| Margin Requirements | Lower overall requirements | Higher per position |
| Liquidation Impact | Affects entire portfolio | Limited to one position |
Defx simplifies trading with a Central Limit Order Book (CLOB) system and advanced tools for risk control, making it ideal for experienced traders looking to optimize their portfolios. Keep reading to learn how to set up cross-margin trading and manage risks effectively.
Cross Margin vs Isolated Margin
Cross-Margin Leverage Basics
This section dives into how cross-margin leverage works and how it compares to isolated margin, helping you understand the key differences.
Cross-Margin Leverage Definition
On Defx Perps DEX, cross-margin leverage lets traders use their entire account balance as collateral across all positions. This setup enables more efficient use of funds while managing risk across multiple trades.
Cross-Margin vs. Isolated Margin
Here’s a quick comparison of how cross-margin and isolated margin differ in handling collateral and risk:
| Feature | Cross-Margin | Isolated Margin |
|---|---|---|
| Collateral Management | Uses entire account balance | Position-specific collateral |
| Risk Distribution | Spread across all positions | Limited to individual positions |
| Margin Requirements | Lower overall requirements | Higher per-position requirements |
| Portfolio Management | Managed as a whole | Managed individually |
| Liquidation Impact | Affects entire portfolio | Limited to a specific position |
| Capital Efficiency | More efficient | Less efficient |
Benefits and Risks
Benefits
- Better use of capital since margin is shared across positions
- Lower margin requirements overall
- Automatically balances risk across trades
- Profits from one position can offset losses in another
- Simplified portfolio management
Risks
- Greater exposure due to interconnected positions
- Risk of entire account liquidation
- Requires more advanced risk management
- Liquidation outcomes may be harder to predict
"Cross-margin collateral support allows HMX to offer the experience of using a centralized exchange without sacrificing on the security benefits of decentralization"
Defx’s dual-chain architecture and risk management systems work to address these risks while preserving the benefits of decentralized trading. Still, traders need to assess their own risk tolerance when deciding between cross-margin and isolated margin strategies.
In the next section, we’ll walk through how to set up cross-margin leverage on Defx, turning these concepts into actionable steps.
Setting Up Cross-Margin on Defx
Account Setup and Funding
To start cross-margin trading on Defx Perps DEX, follow these steps:
- Connect your wallet using a supported blockchain wallet.
- Choose the trading chain you want to use.
- Transfer cryptocurrency to your Defx account.
Note: Cross-margin trading is currently in development and will be available in future platform updates.
Once your account is funded, you can move on to enabling cross-margin trading.
Activating Cross-Margin
After funding your account, adjust your account settings to enable cross-margin trading. Make sure to review the margin requirements, leverage limits, and ensure you have enough collateral across your supported assets.
Once activated, take some time to explore the trading interface.
Using the Trading Interface
The Defx trading interface is built on a Central Limit Order Book (CLOB) system. This system is designed for fast and efficient order matching, making it easier to execute cross-margin trading strategies with its high-performance infrastructure.
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Leverage and Margin Rules
Leverage and Margin Calculations
On Defx Perps DEX, leverage lets you control larger trading positions with less capital. It works as a multiplier, and the calculation is simple: divide the trade value by the chosen leverage level to determine the initial margin.
For instance, if you trade Bitcoin futures worth $10,000 with 10× leverage, you’ll need an initial margin of $1,000.
The initial margin rate is calculated as 1 divided by the leverage chosen. For example:
- 10× leverage: 10% initial margin
- 20× leverage: 5% initial margin
- 50× leverage: 2% initial margin
In cross-margin mode, your entire margin balance supports all your positions. Unrealized profits from open trades can be used as initial margin for new ones. This system emphasizes the need to maintain enough margin to handle market fluctuations.
Liquidation and Margin Calls
Higher leverage comes with a higher risk of liquidation. On Defx, your position will be liquidated if your account value drops below the maintenance margin requirement.
"You must have sufficient funds in your margin account to place a perps order and to maintain the position going forward. If the market moves against you, you may need more collateral in your margin account to cover your losses, otherwise you risk your position being closed, or liquidated, by the exchange." – The Gemini Derivatives Team
To avoid liquidation, keep an eye on your margin ratio. This is calculated as: Margin Asset Value = Margin Balance + Unrealized Gains − Unrealized Losses. If your margin ratio is low, consider adding funds, reducing your position size, or depositing additional USDC.
Defx also uses a margin call system to notify traders when their margin level hits critical points. Keep in mind, statistics show that around 70–74% of retail trading accounts face losses when using leverage.
Risk Control Methods
Defx offers advanced tools designed to help traders manage risk while engaging in high-leverage trades. These tools focus on strategic order placement and continuous monitoring to keep your trading positions secure.
Stop-Loss and Take-Profit Setup
Setting up stop-loss and take-profit orders is essential for protecting your capital when using cross-margin leverage. On Defx, you can configure these orders by selecting the order type, entering the trigger price, defining the position size, and setting the leverage. For added flexibility, trailing stop orders can be used to automatically adjust as the market fluctuates.
Account Health Tracking
Maintaining strong margin levels requires consistent monitoring. Key metrics to keep an eye on include:
- Margin ratio
- Available collateral
- Position sizes
- Unrealized profit or loss
You can set alerts for critical thresholds to ensure your margins remain in good shape. Coupled with monitoring, carefully managing your position sizes is an important part of effective risk control.
Position Size Management
Managing your position size is a cornerstone of risk control in cross-margin trading. Here’s a quick breakdown:
| Component | Calculation | Details |
|---|---|---|
| Risk per Trade | 1–2% of total capital | Helps limit potential losses |
| Position Size | Risk Amount / Stop-Loss Distance | Adjusts based on market volatility |
| Leverage Limit | Based on available margin | Lower leverage reduces risk |
For tighter risk management, using a smaller stop-loss allows you to take on larger positions without increasing your overall risk exposure.
Advanced Trading Methods
Multiple Asset Management
Defx’s cross-margin trading feature lets traders manage a variety of assets within a single margin account. Using the multi-asset mode, the platform calculates the combined value of all assets in the account to determine the liquidation threshold. When asset prices fluctuate beyond preset limits, automatic asset sweeps adjust margins accordingly.
Here’s a breakdown of the key components for managing multi-asset portfolios:
| Component | Description | Impact on Trading |
|---|---|---|
| Basket Value | Total value of all deposited assets | Sets the liquidation threshold |
| Margin Utilization | Percentage of margin currently in use | Affects the ability to open new positions |
| Asset Sweep | Automatic margin adjustments based on price changes | Ensures margins stay within optimal levels |
To avoid falling below the liquidation threshold, traders should keep an eye on their margin utilization through the portfolio page.
Market Hedging Tactics
Traders can take risk management a step further by using hedging strategies. With cross-margin trading, losses in one position can be balanced out by gains or available funds from other positions. This setup is ideal for hedging with correlated assets. For example, a trader might open a position in a related asset that closely mirrors the movements of their primary exposure, creating a cross hedge.
Defx Platform Tools
To support these advanced trading strategies, Defx offers a suite of tools tailored for cross-margin trading. The platform’s hybrid Central Limit Order Book (CLOB) delivers fast order matching with a p95 execution speed of 0.591ms. It also supports native funding and settlement across major blockchains like Arbitrum, Blast, Base, and Solana. Combining the speed and efficiency of centralized exchanges with the security of decentralized systems, Defx enables traders to execute sophisticated strategies while accessing leverage of up to 1000x.
Summary
Defx’s cross-margin leverage combines efficient capital use with solid risk management, helping traders manage their portfolios effectively while keeping risks in check.
| Aspect | Description | Impact |
|---|---|---|
| Margin Level | Key threshold indicator | Affects liquidation risk |
| Capital Efficiency | Shared margin across positions | Lowers margin requirements |
| Risk Distribution | Balance across the portfolio | Offsets losses with profits |
| Liquidation Protection | Utilizes full account collateral | Raises liquidation threshold |
The platform uses specific Loan-to-Value (LTV) ratios for collateral assets, which directly influence borrowing power and account health calculations.
Recommended risk practices:
- Keep a close eye on margin levels.
- Adjust leverage according to market trends.
- Place stop-loss orders near key support levels.
- Use platform tools to monitor account health regularly.
These steps highlight the importance of disciplined trading, focusing on lower leverage and consistent monitoring, as key factors for long-term success.