How to calculate leverage interest on DigiFinex

Calculating leverage interest on DigiFinex involves determining the loan amount, interest rate, interest accrual period, daily interest, and total interest, which is then deducted from the available margin.

Nov 27, 2024 at 08:27 am

How to Calculate Leverage Interest on DigiFinex

Understanding leverage interest calculation is crucial for effective risk management in leveraged trading. On DigiFinex, leverage trading involves borrowing funds to amplify potential returns, but it also incurs interest charges that must be considered. This guide will provide a comprehensive explanation of how to calculate leverage interest on DigiFinex.

Step 1: Determine the Loan Amount

The loan amount is the amount of funds you borrow from DigiFinex to increase your trade size. It is determined by the leverage ratio you select. For example, if you choose a 10x leverage, you can borrow up to 90% of the total trade value, and the loan amount would be 90% of the trade size.

Step 2: Identify the Interest Rate

The interest rate on leverage trading varies depending on the asset being traded and the current market conditions. DigiFinex displays the interest rate for each trading pair on its platform. It is important to note that the interest rate is charged continuously, meaning that it accrues over time.

Step 3: Calculate the Interest Accrual Period

The interest accrual period is the duration over which interest charges are calculated. On DigiFinex, the interest accrual period is 24 hours. This means that interest is charged once per day, regardless of the duration of the trade.

Step 4: Calculate the Daily Interest

To calculate the daily interest, simply multiply the loan amount by the interest rate. This represents the amount of interest that will be charged for each day that the trade remains open.

Step 5: Calculate the Total Interest

To calculate the total interest for the entire period of the trade, multiply the daily interest by the number of days the trade remains open. This gives you the total amount of interest that will be charged over the life of the trade.

Example

Suppose you open a leveraged trade on BTC/USDT with a trade size of $10,000 and a leverage of 10x. The interest rate for BTC/USDT is currently 0.05% per day.

1. Loan Amount: $9,000 (90% of $10,000)
2. Interest Rate: 0.05% per day
3. Interest Accrual Period: 24 hours
4. Daily Interest: $9,000 * 0.05% = $4.50
5. Total Interest: $4.50 * 7 (if the trade remains open for 7 days) = $31.50

Therefore, the total interest charged for this leveraged trade over a period of 7 days would be $31.50.

Additional Considerations

• Interest charges are deducted from the available margin in your trading account.
• If the margin balance falls below the required maintenance margin, the trade will be liquidated.
• It is important to monitor leverage interest charges regularly to ensure that they do not exceed your profit potential.
• Margin trading involves significant risk, and you should only use it if you fully understand the implications.