There are two types of trades you can perform on the Trade page:
- Isolated margin trades (assigning a specific amount of an asset as margin)
- Cross margin trades (utilizing all positive balances in your dYdX Account as margin)
There are certain situations where it is better or worse to use isolated or cross, depending on your situation.
For starters, Cross trades always come out of your 'Account', whereas Isolated trades can be funded via your Account or your Wallet. When Isolated trades are closed, funds will always go to your Account - this way they're always working for you (any positive balance in your account is earning interest).
With Isolated Margin, each position is collateralized independently. The maximum you can lose on any one isolated trade is limited by the amount of margin deposit you put up for that specific position. You can have an unlimited number of isolated trades open at the same time. Each isolated position will have a specific leverage and liquidation price. Higher leverages will require less margin deposit than lower leverages.
Changing the leverage changes the margin requirement of the position, but the size of the position is the same whether you open a 10 ETH position at 2x, 3x, 4x. In this example, at 2x leverage, your position might require 5 ETH worth of DAI as margin deposit, whereas 3x would require 3.33 ETH worth of DAI and for 4x, 2.5 ETH worth of DAI.
Cross Margin trades are collateralized using your entire dYdX Account (all of the balances shown on the "Account" page). Cross trades allow you to buy or sell any amount in the selected market so long as you maintain a collateral ratio of 1.25x initial / 1.15x minimum on your account. On dYdX you can "Sell" assets you do not have, which will cause your balance in those assets to go negative (indicating you have borrowed that asset).
Using cross allows you to have more fine grained control of the exact trades you make. While using Cross Margin, if your dYdX Account falls below the minimum of 1.15x collateralization, your entire account will be liquidated until you have no more negative balances (borrows). In the future, when we add additional assets to dYdX you will be able to borrow and collateralize your account with multiple assets at the same time.
Lastly, trading in Cross mode allows you to execute simple buy and sell trades if you prefer to exchange assets without any margin trading involved.