Words Explanations in Margin Trading

Explore main words and their explanations in Margin Trading with MEXC blog:

Total assets: Total denominated assets + Total trading assets x Latest trading price

Total liabilities: Borrowed denominated tokens + Borrowed trading assets x Latest trading price + Outstanding interest fee in denominated assets] + Outstanding interest fee in trading assets x Latest trading price

Net Assets: Total Assets – Total Liabilities

Available assets: The asset that users in the isolated margin account can use to place orders, including the capital and borrowed parts.

Risk rate and liquidation:

Risk rate = Total assets/Total liability = (Total denominated assets + Total trading assets x Latest trading price) / (Borrowed denominated tokens + Borrowed trading assets x Latest trading price + Outstanding interest fee in denominated assets] + Outstanding interest fee in trading assets x Latest trading price) x 100%

For example, a user borrows 0.1 BTC with 1000USDT and the market price is 50,000 USDT

Total assets = 1000+0.1*50,000 = 6,000 USDT

Total responsibility = 0.1*50,000 + 0.0000033*50,000 = 5000.17 USDT

At this point, the risk ratio is 6,000/5,000.165 = 120%

If the user sells 0.1 BTC at 50,000USDT, but the market price rises to 55,000USDT,

Total Assets = 6000

Total Liabilities = 0.1*55,000 + 0.0000033*55,000 = 5,500.18 USDT

At this time, the risk ratio is 6000/5500.18 = 109.09%, which is close to the Liquidation line. Liquidation may happen when the Isolated account’s risk rate is lower than 105%. The system will close the trade to return the funds provided from the platform.

Risk rate and liquidation
Risk rate and liquidation

Liquidation Ratio:

When the user’s risk rate reaches the liquidation line, the system will trigger the liquidation to automatically sell the user’s assets and return the borrowed tokens and interest;

Liquidation Alert Ratio:

When the user’s risk ratio reaches the liquidation line, the system will send the user a notification via text message to remind the users that there is a liquidation risk;

Margin Call Ratio:

When users’ risk rate reaches the margin call line, the system will send the user a notification via text message to supply additional margin to avoid the risk of liquidation.

Expected liquidation price = [(Borrowed denominated assets + Outstanding interest fee in denominated tokens) x Liquidation risk rate – Total denominated assets] ÷ Total trading assets – (Borrowed trading assets + Outstanding interest fee in trading assets) x Liquidation risk rate)

Margin Shortage:

Margin Shortage occurs when a user’s account triggers liquidation and the remaining assets are not enough for repayment. Users are required to transfer assets promptly to not trigger our platform’s risk control. If risk control is triggered, users will be unable to withdraw assets, trade margin products, and more. 

Transfer assets out of the Margin account

Users that are borrowing assets can transfer part of the assets with a risk rate higher than 200% to the Spot account after deducting borrowed assets and interest fee. The risk rate of an Isolated Margin account should not be lower than 200% after the transfer. Users with no ongoing loan can transfer all the available assets out with no restrictions.

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The content of this webpage is not investment advice and does not constitute an offer or solicitation to offer or recommendation of any investment product. It is for general purposes only and does not take into account your individual needs, investment objectives, and specific financial circumstances. Investment involves risk.

Please note that the information and data above are cited from third-party sources & whitepapers and do not represent MEXC. Please refer to direct sources for more details. This is not financial advice and does not constitute an offer or solicitation to offer or recommend any investment product. It is for general purposes only and does not take into account your individual needs, investment objectives, and specific financial circumstances. Investment involves risk.

This disclaimer informs readers that the MEXC Creator’s content, views, thoughts, and opinions expressed in the articles belong solely to the creators and authors, and not to MEXC Global itself. MEXC Global doesn’t give any investment recommendations or advice.

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