Isolated margin refers to a trading mechanism that limits the amount of collateral available for a specific position to a particular margin account. In this setup, only the funds allocated to that trade are at risk, protecting the rest of the trader’s capital from being affected by losses.For example, if a trader opens a leveraged position with an isolated margin, the margin they designate is the maximum amount that can be used to cover potential losses for that trade. If the position goes against them, only the funds in that specific margin account will be lost, while other assets in different accounts remain unaffected.This approach contrasts with cross margin, where available funds across all accounts can be used to cover losses on any position. Isolated margin is often preferred by traders who want to manage risk more effectively, as it helps them stay within their specified risk tolerance for individual trades.