Note: Liquidations can also happen due to our margin obligation term limits.

**Margin call level**

The "margin call level" is the margin level at which you are in danger of having some of your positions forcibly closed (or "liquidated").The margin call level is approximately 80%, although the exact threshold varies in accordance with price volatility in applicable markets.

When your margin level reaches the margin call level, you may receive a notification prompting you to either close some of your positions or deposit more collateral funds. Margin call level notifications are generally sent by email. However, margin call level notifications are **not** **guaranteed**. As such, it is important to proactively monitor your margin level.

If your margin level falls below the margin call level, you authorize us to liquidate either all of your open positions, or only enough to get your margin level above 100%, at our reasonable discretion. Positions will be liquidated in the order First In, First Out (FIFO) regardless of currency pair or whether the position is in profit. Execution order may vary depending on the market conditions at the time.

**Margin liquidation level**

The “margin liquidation level” is the margin level at which an automated liquidation process will occur. The margin liquidation level is approximately 40%, although the exact threshold varies in accordance with the price volatility in applicable markets.

**Note:** The liquidation process that initiates when your margin level falls below the margin liquidation level is automated, which means that once the process has started, it is not possible to stop it.** **

**Calculate margin call price**

You can use a series of linear equations to estimate how much the price of an asset would need to fall for your margin level to drop to 80% (the “margin call price”)..

For example, assume you've just entered into a “long” BTC spot position on margin by purchasing 1 BTC with 5:1 leverage at a price of 20,000 USD. You can estimate the approximate margin call price of your purchased BTC as follows.

Assume that, after purchasing the 1 BTC, your Kraken account metrics are :

Trade Balance - 10,000 USD *(assume your collateral balances are 100% composed of USD)*

Used Margin - 4,000 USD

Opening Cost - 20,000 USD

Current Margin Level - 250%

We start by calculating what your equity would have to be for your margin level to fall to 80 %:

Since:Margin Level = Equity / Used Margin

Then:

Margin Level * Used Margin = Equity

So:

80% * 4,000 USD = 3,200 USD

Using the calculated equity amount (in this example, 3,200 USD), we can estimate the aggregate amount the BTC you purchased would need to decrease in value to trigger a margin call.

Since:

Equity = Trade Balance + Profit/Loss

Then:

Equity - Trade Balance = Profit/Loss

So:

3,200 USD - 10,000 USD = -6,800 USD

Now with the calculated Profit/Loss (in this example, -6,800 USD), we can approximate a “current valuation” for your spot position on margin. Keep in mind this calculation depends on if you are “long” or “short” a given asset.

*For a “long” spot position on margin, calculate:*

Since:

Profit/Loss = Current Valuation - Opening Cost

Then:

Profit/Loss + Opening Cost = Current Valuation

So:

-6,800 USD + 20,000 USD = 13,200 USD

*For a “short” spot position on margin, calculate:*

Since:

Profit/Loss = Opening Cost - Current Valuation

Then:

Opening Cost - Profit/Loss = Current Valuation

With the current valuation (in this example, 13,200 USD) we can estimate the BTC margin call price.

Since:

Current Valuation = Price * Volume

Then:

Current Valuation/ Volume = Price

So:

13,200 USD / 1 = 13,200 USD

So (assuming your collateral balances are 100% composed of USD), for your margin level to drop to 80%, the price of BTC would have to fall to approximately 13,200 USD. You can use the equations above to estimate what the price of BTC would have to be for your margin level to fall to the margin liquidation level of 40% as well.

**Note: **A caveat of using the above equations to calculate a margin call price is that they assume your collateral balances are 100% composed of USD. If you are using digital assets (e.g., BTC or ETH) as collateral, the USD value of your collateral would go down as the price of that digital asset goes down, causing the margin call price to actually be higher than the above calculations would suggest. For a more accurate margin call price approximation, you would need to re-calculate the price at separate intervals in time. By the same logic, if the price of your collateral currency increases, your margin call price may decrease, since the value of your collateral would be higher.