You may close all or part of a spot position on margin by transferring to us, directly from your account balance with no trade involved, funds of the type used by Kraken to make the initial margin extension (e.g., if you took an extension of margin from Kraken denominated in BTC, you must have sufficient BTC in your account to settle the position). Upon settling, you retain the asset that you originally received from the market at the time of the position’s opening clear of any restrictions previously associated with your margin obligation. There are no trading fees associated with entering into a settlement transaction. If your account balance is not sufficient to enter into a settlement transaction, you may deposit additional funds into your account. If you have sufficient funds in your account, but they are not of the type used by Kraken to make the initial margin extension, you may execute an order for the type and amount of funds you need to settle the position (e.g., buy 1 BTC of BTC/USD).

Note: if you have multiple positions, they will be settled in the order they were created following the "First in First Out" (FIFO) rule.Let's look at two examples:

Through a closing transaction, you may partially or fully close a spot position on margin by executing an opposing order for up to the same volume as the order that opened your position (a sell closes a “long” spot position on margin and a buy closes a “short” spot position on margin). The proceeds from a closing transaction are applied first to the satisfaction of your margin obligation to Kraken. Then, any remaining profit (or loss) is added to (or taken from) your account balances, in an amount denominated in the quote currency of the pair you are trading (e.g., EUR in the pair BTC/EUR).

If you have multiple collateral currencies, when your loss is realized (regardless of if you close it yourself or it’s closed via an automated liquidation), it will be deducted in the following order of preference: 

If the loss is greater than your balance of collateral currencies, other funds in your account will be taken as needed. 

As an example, assume you had a leveraged position on ADA/BTC. 

The order of preference for realizing the loss would be: 

If you do not have enough funds in your account denominated in the quote currency of the pair you are trading to cover any remaining loss, funds in your account will be converted, as necessary, into funds denominated in the quote currency of the pair you are trading, subject to a fee (a 1.5% fee for converting between two cash currencies), 2.5% fee for a conversion of BTC or ETH to or from cash, and a 5% fee for all other conversions). As a result, you may want to execute an order for the type and amount of funds you need before entering into a closing transaction so that your closing transaction does not result in a conversion fee.

Note: If you have multiple open positions on margin, they will be closed in the order they were created following the "First In, First Out" (FIFO) rule.

Each individual position will follow the logic outlined above for realizing any loss.

Position settlement may only be initiated via the Positions widget on Kraken Pro, or through the API. The position settlement must be in the same currency pair as the order that opened the spot position on margin.

"Settle" orders work as described in our API documentation under the private user endpoint 'Add Standard Order' (AddOrder) with the "order type" as “settle-position”.

See the entire API documentation here.