How is the liquidation price of CoinEx contract calculated?

Understanding the Basics of Liquidation Price in CoinEx Contracts

The liquidation price is a critical concept for traders engaging in futures contracts on platforms like CoinEx. It refers to the specific market price at which a trader’s position will be automatically closed by the system due to insufficient margin. This mechanism protects both the trader and the exchange from further losses when the market moves against an open position.

In CoinEx futures trading, liquidation occurs when the mark price reaches the liquidation price level set by the system based on the trader's leverage, position size, and maintenance margin requirements. Understanding how this price is calculated helps traders manage their risk effectively and avoid unexpected forced closures.

Factors Influencing the Calculation of Liquidation Price

Several variables are involved in determining the liquidation price on CoinEx. These include:

• Position Size: The larger the position, the closer the liquidation price tends to be, assuming other parameters remain constant.
• Leverage Used: Higher leverage increases exposure and reduces the distance between the current price and the liquidation price.
• Maintenance Margin Rate: Each contract has a specified minimum margin requirement that must be maintained to keep the position open.
• Funding Fees: Depending on the direction of the funding rate, these fees can slightly affect the liquidation calculation over time.
• Entry Price: The initial price at which the position was opened plays a foundational role in the formula.

Each of these factors contributes to the final liquidation price value. Traders should be aware that changes in any of these elements during the lifespan of a trade can dynamically shift the liquidation price.

The Formula Behind Liquidation Price on CoinEx

For CoinEx Futures, the formula used to calculate the liquidation price differs depending on whether the trader is holding a long or short position.

For long positions, the formula is:

Liquidation Price = Entry Price × (1 - Maintenance Margin Rate - Funding Fee Rate) ÷ (Leverage - 1 × Maintenance Margin Rate)

For short positions, the formula is:

Liquidation Price = Entry Price × (1 + Maintenance Margin Rate + Funding Fee Rate) ÷ (Leverage + 1 × Maintenance Margin Rate)

It’s essential to note that the funding fee rate is typically very small and may only have a noticeable impact over extended periods. However, it still plays a role in precise liquidation price calculations.

Step-by-Step Example of Liquidation Price Calculation

Let’s walk through a practical example using real numbers to better understand how the liquidation price is calculated on CoinEx.

Assume the following:

• Trading pair: BTC/USDT
• Position type: Long
• Entry Price: $30,000
• Leverage: 10x
• Maintenance Margin Rate: 0.5%
• Funding Fee Rate: 0.01%

Using the formula for long positions:

• Step 1: Calculate the numerator:30,000 × (1 - 0.005 - 0.0001) = 30,000 × 0.9949 = 29,847

• Step 2: Calculate the denominator:(10 + 1 × 0.005) = 10.005

• Step 3: Divide numerator by denominator:29,847 ÷ 10.005 ≈ 2,983.11

This means the liquidation price would be approximately $2,983.11 for this long position. If the mark price drops to this level, the system will trigger a liquidation.

Differences Between Mark Price and Last Traded Price in Liquidation Calculations

One important point often overlooked by novice traders is that liquidation price on CoinEx is based on the mark price, not the last traded price. The mark price is a fair price derived from the underlying spot market and funding rates to prevent manipulation and ensure accurate liquidations.

If the last traded price temporarily spikes due to market volatility or thin order books, but the mark price hasn’t reached the liquidation price, the position will not be liquidated. This distinction is crucial for understanding why some positions survive sharp price swings while others don’t.

Traders should always check the mark price on the CoinEx platform before making assumptions about liquidation risks.

How to Check Your Liquidation Price on CoinEx Platform

CoinEx provides real-time visibility of your liquidation price directly within the trading interface. Here’s how you can locate it:

• Log into your CoinEx account and navigate to the Futures Trading section.
• Open the relevant trading pair and look under the 'Positions' tab.
• In the position details, you’ll see a field labeled 'Liquidation Price.'
• Hovering over or clicking this value may also reveal additional information such as unrealized PnL, maintenance margin, and margin ratio.

For mobile users:

• Access the app and go to the Contracts tab.
• Select the active position.
• Scroll down to view the liquidation price displayed clearly.

These features allow traders to monitor their exposure continuously and make informed decisions regarding adding margin or closing positions proactively.

Frequently Asked Questions

Q: Can I adjust my liquidation price after opening a position?A: You cannot directly change the liquidation price, but you can reduce the risk of liquidation by increasing your margin or reducing your position size manually.

Q: Does changing leverage affect the liquidation price?A: Yes, adjusting leverage after opening a position can influence the liquidation price. Increasing leverage brings the liquidation price closer to the entry price, while decreasing leverage moves it farther away.

Q: What happens if my balance falls below the maintenance margin?A: If your account equity falls below the required maintenance margin, your position will be partially or fully liquidated depending on the system settings and available insurance fund coverage.

Q: Is there a way to receive alerts when approaching liquidation?A: CoinEx does not offer native alerts for liquidation price, but traders can use third-party tools or set up custom alerts via APIs or external apps that monitor wallet status and position health.