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Margin call level and margin liquidation level
##### 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.Reaching this threshold will trigger the liquidation process. However, liquidations are filled at the best price that is available, and in volatile markets this can lead to increased losses. We recommend monitoring your margin level and closing your position ahead of the margin liquidation to prevent additional losses.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
###### Margin Call Price = Entry Price - ((Equity - (Used Margin x 0.8)) / Open Volume*)
Liquidation Price
Liquidation Price = Entry Price - ((Equity - (Used Margin x 0.4)) / Open Volume*)
*Open Volume is the amount of the asset purchased if you didn’t close any part of the position, it's the volume open minus the volume closed.
For example, if you open a long position for 2 BTC and close 1 BTC the open volume is 1 BTC.
Why are the formulas different for Long and Short Position(s)?
On a long position, margin is used from the quote currency.
• For example, when a long position is opened on the BTC/USD market (where the quote currency is USD), the currency utilized for the Used Margin is
USD
.
• Therefore, USD value of the Used Margin
does not change
when the BTC/USD market price changes.
On a short position, margin is used from the base currency.
• For example, when a short position is opened on the BTC/USD market (where the base currency is BTC), the currency utilized for the Used Margin is
BTC
.
• Therefore, USD value of the Used Margin
changes
when the BTC/USD market price changes.
Since the Used Margin changes on a short position as opposed to a long position, formulas become different.
Calculating Margin Call Price for Short Position(s)
Assume the following:- an account has \$5,000 balance,- BTC/USD price is \$30,000.
At that time, a short position is opened with- an entry price of \$30,000,- a volume of 0.2 BTC,- a used leverage of 4x.
In this scenario, margin call and liquidation prices are calculated by using the following formulas:
###### Margin Call Price = Leverage x (Trade Balance + (Entry Price x Open Volume)) / (Open Volume x (0.8 + Leverage))
Liquidation Price
Liquidation Price = Leverage x (Trade Balance + (Entry Price x Open Volume)) / (Open Volume x (0.4 + Leverage))
How to calculate Margin Call Price?
Margin Call Price = Leverage x (Trade Balance + (Entry Price x Open Volume)) / (Open Volume x (0.8 + Leverage))Margin Call Price = 4 x (\$5,000.00 + (\$30,000.00 x 0.20)) / (0.20 x (0.8 + 4))Margin Call Price = 4 x (\$5,000.00 + \$6,000.00) / (0.20 x 4.8)Margin Call Price = 4 x \$11,000.00 / 0.96Margin Call Price = \$44,000.00 / 0.96Margin Call Price = \$45,833.33
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.
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.