Liquidation Introduction of Perpetual Contract – Toobit

What is Liquidation?

Margin ratio is an indicator to estimate the risk of users’ assets. When the margin ratio is higher than or equal to 100%, liquidation will be triggered. It is recommended that you pay close attention to margin ratio changes, so as to avoid your positions from liquidation.

Margin ratio (Isolated) = Maintenance margin / （Isolated Position Margin + Unrealized PnL）

Margin ratio (Cross) = Maintenance margin / （Wallet Balance - ΣIsolated Position Margin + Cross Unrealized PnL

What’s Estimated Liquidation Price?

The estimated liquidation price is an estimated price of a contract when the margin ratio is 0%. In cross margin mode, all USDT-margined contracts share the same margin in the cross margin account and all existing positions of these contracts will be liquidated simultaneously once the margin ratio is 0%, even if the estimated liquidation price varies for different trading pair. This price is for reference only and liquidation will be subject to the margin ratio.

What is Mark Price?

To reduce unnecessary liquidations, USDT-margined contracts use mark price as another reference price for liquidation. That is, when the system determines whether to trigger a liquidation or not, it must satisfy that the margin ratios calculated by the last price and mark price respectively are more than or equal to 100%. Using mark price for the calculation can lower the risk of liquidations caused by several abnormal last prices, which can lead to serial liquidations.

Example for liquidation in the isolated margin mode:

Assume Eve opened a long position of 10 amount ETH/USDT at the price of 1500 USDT. The leverage is 50x, so the maintenance margin rate is 1%. Without considering the fee, what will happen to Eve’s position when the mark price of ETH/USDT swaps reaches 1483 USDT?

Formula：

Margin ratio (Isolated) = Maintenance margin /（Isolated Position Margin + Unrealized PnL）

Maintenance margin = Entry Price * Amount * maintenance margin rate
Isolated Position Margin = Entry Price * Amount / Leverage
Long Position Unrealized PnL = （ Mark Price - Entry Price）* Amount

Therefore，

Maintenance margin =1500 * 10 * 1%= 150 USDT

Isolated Position Margin =1500 * 10 / 50= 300 USDT

Long Position Unrealized PnL=(1483 - 1500) * 10= -170 USDT

Margin ratio (Isolated)=[150/(300-170)]*100%=115.38%

Eve‘s ETH/USDT long position will be liquidated when the mark price reaches 1483 USDT

Example for liquidation in the cross margin mode:

Assume Tom has 350 USDT in his futures account, opened a short position of 20 amount ETH/USDT at the price of 1600 USDT. The leverage is 100x, so the maintenance margin rate is 0.50%. Without considering the fee, what will happen to Eve’s position when the mark price of ETH/USDT swaps reaches 1596 USDT?

Formula：

Margin ratio (Cross) = Maintenance margin/（Wallet Balance -ΣIsolated Position Margin + Cross Unrealized PnL）

Maintenance margin = Entry Price * Amount / Leverage
Short Position Unrealized PnL = （Entry Price - Mark Price）* Amount

Therefore;

Maintenance margin=1600*20/100=320 USDT

Short Position Unrealized PnL=（1600-1596）*20=-80 USDT

Margin ratio (Cross)=[320/（350-80）]*100%=118.5%

Tom‘s ETH/USDT short position will be liquidated when the mark price reaches 1496 USDT

(The above content is for explanation only, the specific settings or related changes shall subject to the latest announcement)

Toobit reserves the right in its sole discretion to amend or cancel this announcement at any time and for any reason without prior notice.

Risk Warning: Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Toobit is not liable for any losses that might arise from your use of Margin. This information should not be regarded as financial or investment advice. For more information, see ourTerms of UseandRisk Warning.

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