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.
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 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.
Start your travel on MEXC Global