How to calculate Upbit leverage fee

Traders on Upbit can determine their leverage fee by calculating the product of their leverage ratio, trading pair fee rate, and funding rate, allowing them to optimize their trading strategies and anticipate potential costs.

Nov 12, 2024 at 05:01 am

How to Calculate Upbit Leverage Fee

Upbit, a prominent South Korean cryptocurrency exchange, offers leverage trading for various cryptocurrencies. Leverage trading allows traders to amplify their positions using borrowed funds, potentially magnifying both profits and losses. Understanding the leverage fee is crucial for traders to optimize their trading strategies and avoid unexpected costs.

Factors Influencing Leverage Fee Calculation

The leverage fee on Upbit is primarily determined by the following factors:

• Leverage Ratio: The ratio of borrowed funds to the trader's equity.
• Trading Pair: The specific cryptocurrency pair traded.
• Funding Rate: The periodic interest rate charged or paid on borrowed or lent funds.

Formula for Calculating Leverage Fee

The leverage fee on Upbit is calculated using the following formula:

Leverage Fee = Leverage Ratio * Trading Pair Fee Rate * Funding Rate

Step-by-Step Guide to Calculate Upbit Leverage Fee

1. Determine the Leverage Ratio:

• Select the desired leverage ratio. Upbit offers leverage ratios ranging from 1x to 20x for margin trading and up to 125x for futures trading.

2. Check the Trading Pair Fee Rate:

• Refer to Upbit's trading fees schedule to determine the fee rate associated with the specific trading pair being traded.

3. Ascertain the Funding Rate:

• The funding rate is dynamic and varies based on market conditions. Refer to Upbit's real-time data for the current funding rate.

Sample Calculation

Suppose you plan to trade ETH/BTC with a leverage ratio of 10x and a trading pair fee rate of 0.05%. The current funding rate for ETH/BTC is -0.01%.

• Leverage Ratio = 10x
• Trading Pair Fee Rate = 0.05%
• Funding Rate = -0.01%

Leverage Fee Calculation:

Leverage Fee = 10x * 0.05% * (-0.01%) = -0.00005%

The negative sign indicates that the borrowed funds are being used to short ETH/BTC, and the trader will pay the leverage fee to the exchange. In this case, the leverage fee equates to a minimal reduction in the PNL (profit and loss) generated from the trade.