Liquidation Price Calculation (USDT Contract):
Last updated
Last updated
I. Overview of Liquidation
Liquidation occurs when the mark price reaches the liquidation price. At this point, the exchange will close the position at the bankruptcy price, which is the price level when the margin is 0%. When the position margin balance falls below the maintenance margin requirement, liquidation will be triggered.
(A) Isolated Margin Mode
In the isolated margin mode, a specific amount of margin is allocated to each position, independent of the trader's account balance. This mode allows traders to better control account risk.
Formula for Calculation:
For a long position (buy):
Liquidation Price (Long) = Entry Price - [ (Initial Margin - Maintenance Margin) / Contract Quantity ] - (Additional Margin / Contract Quantity)
For a short position (sell):
Liquidation Price (Short) = Entry Price + [ (Initial Margin - Maintenance Margin) / Contract Quantity ] + (Additional Margin / Contract Quantity)
Note:
Position Value = Contract Quantity × Entry Price
Initial Margin (IM) = Position Value / Leverage
Maintenance Margin (MM) = (Position Value × Maintenance Margin Ratio) - Maintenance Margin Deduction
Maintenance Margin Ratio (MMR) is based on the risk limit level. For more information, please refer to the contract parameters.
Example 1 (Long Position): Trader A uses 50x leverage to open a 1 BTC long position at a price of 20,000 USDT. Assume the maintenance margin rate is 0.5% and no additional margin is added:
Initial Margin = 1 × 20,000 USDT / 50 = 400 USDT
Maintenance Margin = 1 × 20,000 × 0.5% - 0 = 100 USDT
Liquidation Price = 20,000 USDT - (400 - 100) = 19,700 USDT
Example 2 (Short Position): Trader B uses 50x leverage to open a 1 BTC short position at 20,000 USDT. Later, they manually add 3,000 USDT of margin. The new liquidation price after adding margin will be calculated as follows:
Initial Margin = 1 × 20,000 USDT / 50 = 400 USDT
Maintenance Margin Rate = 0.5%
Maintenance Margin = 1 × 20,000 × 0.5% - 0 = 100 USDT
Liquidation Price = [20,000 USDT + (400 - 100)] + (3,000 / 1) = 23,300 USDT
Example 3 (Long Position, Funds Fee Deducted from Position Margin): Trader A uses 50x leverage to open a 1 BTC long position at 20,000 USDT. The initial liquidation price is 19,700 USDT (as shown in Example 1). However, the trader incurs a 200 USDT funding fee, and the available balance is insufficient to pay the fee.
When the available balance is insufficient to pay the funding fee, the fee will be deducted from the position margin. As the position margin decreases, the liquidation price will move closer to the mark price, making the position more likely to be liquidated.
As the position margin decreases, the new liquidation price will be calculated as follows:
Initial Margin = 1 × 20,000 USDT / 50 = 400 USDT
Maintenance Margin Rate = 0.5%
Maintenance Margin = 1 × 20,000 × 0.5% - 0 = 100 USDT
Liquidation Price = [20,000 - (400 - 100)] - (-200 / 1) = 19,900 USDT
(B) Cross Margin Mode
In cross margin mode, the liquidation price may change continuously because the available balance is affected by other trading pairs. In this mode, the initial margin for each position is independent of the account balance, but the remaining balance is shared across all positions. The available balance will be influenced by unrealized profits and losses from all current positions. Liquidation only occurs when the available balance is 0, and the maintenance margin is insufficient to maintain the position.
Example 1 (Without Fees): In cross margin mode, assume Trader A uses 100x leverage to open a 2 BTC long position at a price of 10,000 USDT. The current available balance is 2,000 USDT.
Maintenance Margin = Maintenance Margin Rate × Order Value = 2 × 10,000 × 0.5% = 100 USDT
To calculate the maintenance (liquidation) price, we first need to determine the current sustainable loss.
Sustainable Loss Total = Available Balance - Maintenance Margin = 2,000 - 100 = 1,900 USDT
With a total sustainable loss of 1,900 USDT, the position can withstand a price drop of 950 USDT (1,900 / 2). Therefore, the liquidation price of the position is 9,050 USDT (10,000 - 950).
Trader A accepts this risk level and opens the position. The system will allocate 200 USDT from their available balance as the initial margin for opening the position.
Initial Margin = Position Quantity × Entry Price / Leverage = (2 × 10,000) / 100 = 200 USDT
Available Balance = 1,800 USDT
Example 2: After some time, the price rises to 10,500 USDT, and Trader A’s unrealized profit is 1,000 USDT (500 × 2).
Sustainable Loss Total = Available Balance + Initial Margin - Maintenance Margin + Unrealized Profit = 1,800 + 200 - 100 + 1,000 = 2,900 USDT
With a total sustainable loss of 2,900 USDT, the position can withstand a price drop of 1,450 USDT (2,900 / 2). Therefore, the liquidation price of the position is 9,050 USDT (10,500 - 1,450).
For Positions with Unrealized Profit:
Liquidation Price (Long) = [Entry Price - (Available Balance + Initial Margin - Maintenance Margin)] / Net Position Quantity
Liquidation Price (Short) = [Entry Price + (Available Balance + Initial Margin - Maintenance Margin)] / Net Position Quantity
For Positions with Unrealized Loss:
Liquidation Price (Long) = [Current Mark Price - (Available Balance + Initial Margin - Maintenance Margin)] / Net Position Quantity
Liquidation Price (Short) = [Current Mark Price + (Available Balance + Initial Margin - Maintenance Margin)] / Net Position Quantity
Note: Due to closing fees, the actual liquidation price may slightly differ.
To avoid liquidation, it is recommended that traders maintain an appropriate margin level and stay alert to market price movements. For more details on maintenance margin calculations and risk management, please refer to related risk management documentation and tutorials.
To learn more about the mark price and real-time data, traders can access the relevant tools on the trading platform or directly contact customer service for the latest information.
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