Here are some examples to help tie everything together.
Suppose you fund an account with $5,000 and open a $10,000 short position using 5x leverage with the price of BTC/USD at 50,000. As a short position, this would use 0.2 BTC from the Kraken Margin Pool. Your margin is is one-fifth of the funds used for the position, so 0.04 BTC, or $2,000 at the current BTC/USD price. The margin level when you open the position is ($5,000 ÷ $2,000)×100 = 250%.
If the price rises to 65,200, your position has an unrealized loss of $3040 and your equity would be $5,000 - $3040 = $1960. Because your Used Margin is in terms of BTC, your Used Margin in terms of USD would be 0.04 BTC * 65,200 BTC/USD = $2,608.
Your margin level would then be ($1,960 ÷ $2,608)×100 = 75%. At this level, you are below the margin call level and are in danger of being liquidated. When a liquidation occurs, your oldest position will be closed first, followed by newer positions (FIFO). All open positions are vulnerable to liquidation, regardless of the currency pair or unrealized profit/loss.
As you can see from this example, it's possible to open a position twice as large as your account balance and still be able to endure a sizable loss before margin call. Your own risk management on this trade should have you closing your position well before margin call, but it's good to understand what the limits are.
Let's see what happens in the example above had 2x leverage been used instead of 5x. With 2x leverage the margin for the position is 0.1 BTC, which would correspond to $5,000 at the price of 50,000 BTC/USD. So as soon as the position is opened the margin level is 100%. The system might let you open this position (though it wouldn't let you open a position where your margin level starts below 100%), but it wouldn't be a good idea to open a position where your margin level starts so low because you are already close to being liquidated. In this example if the price rises, to 54,500 BTC/USD, your position would have an unrealized loss of $900 and would bring your margin level to 75% where you are in danger of being liquidated. More leverage could be used so the margin level starts higher and a stop should be set on the position so that the position is closed well before there is any danger of margin call.
While positions will be sent for liquidation based on FIFO, multiple pairs might have different execution times as time priority for fill will be per order book.
The decimal and thousands separators shown in this article may differ from the formats displayed on our trading platforms. Review our article on how we use points and commas for more information.