What You Need To Know About Margin Funding and Liquidation
Index Price: BitOrb uses a weighted average calculation of multiple spot exchanges to derive the Index Price every second.
Mark Price: Mark price is referenced to real-time spot price transactions from major spot exchanges, and is used to calculate unRealised profit and loss (see separate document for full details of how Mark Price is calculated on the BitOrb Exchange). Mark price is used as the trigger price for liquidation, which protect traders from market manipulations on the BitOrb exchange.
Initial Margin: Risk limit level determines the maximum amount of leverage a trader can use, which influence the amount of initial margin needed. BitOrb offers up to 100:1 leverage. Traders should note that the higher leverage used, the lower the Initial Margin will be and the closer the Liquidation Price will be to the Entry Price (i.e higher leverage decreases price to liquidation and thus increases risk of losing capital).
Let say you want to buy a contract value of 10,000 USD and use Leverage 100x. The amount needed for you to put is only 100 USD. For an example, Hugo wants to buy 3500 contracts at 7100 USD by using Leverage 10x. The calculation for the Initial Margin is shown below:
Maintenance margin: If the amount of Margin required to hold a position, if the margin level of a position falls below Maintenance Margin, it will get liquidated. The maintenance margin rate of perpetual contract is constant at 0.5% and is the minimum account value required to continue holding a position and prevent liquidation. By using above example, we calculate the Maintenance Margin below:
Once Hugo loses the positions up to
Funding Rate Mechanism: “Funding” is exchanged automatically between buyers and sellers every 8 hours. When the funding rate is positive, long positions pay the short positions. Further, if the funding rate is negative, all open short positions pay the open long positions. Traders will only pay or receive funding if they hold a position at one of these times. Funding timestamp: 04:00 UTC +8, 12:00 UTC +8 and 20:00 UTC +8. Traders will be able to view the past, expected and time to next funding event in the Contract Specification box on the BirOtb Exchange.
Liquidation: Liquidation occurs when the margin level of a position hits the maintenance margin. Once it gets liquidated, the trader has lost their entire initial margin. The higher the leverage, the higher the liquidation price, the closer for the distance of the Mark Price to the Liquidation Price.
To avoid getting liquidated, a trader can add margin to distance the Liquidation Price from Mark Price, or by setting a Stop Loss between the Entry Price and Liquidation Price.
Calculation of Liquidation Price
Jay buys long at 7590 USD while using Leverage 30x.
Kelly sells short at 6443 USD while using Leverage 15x.
Add Margin: Traders are able to “Add Margin” to orders. This will effectively add to the Margin position and increase the current Mark Price the liquidation price gap (i.e lowers risk of liquidation through increasing collateral tied up in the Filled Order).