Why does MEXC use reasonable prices to calculate profit and loss and liquidation?
MEXC uses a unique and reasonable price tag system to avoid unnecessary liquidation on highly leveraged products. Without this system, the mark price may deviate greatly from the price index due to market manipulation or lack of liquidity, resulting in unnecessary liquidation. This system sets the tag price to a reasonable price instead of the latest transaction price, thereby avoiding unnecessary liquidation.
Reasonable price tag mechanism
For a swap contract, its reasonable price is equal to the underlying index price plus the capital cost basis, which decreases over time.
All Automatic Light Reduction contracts use a reasonable price tag method. In addition, please note that this method only affects the price of the liquidation price and the unrealized profit and loss, it does not affect the realized profit and loss.
Note: This means that when your order is executed, you may immediately see positive or negative unrealized gains and losses because of a slight deviation between the fair price and the transaction price. This is normal and does not mean that you have lost money, but be sure to pay attention to your strong price and avoid liquidating too early.
The fair price of the perpetual contract is calculated using the capital cost basis rate:
Funding fee basis rate = fund rate * (time to the next payment of funds / time interval of funds)
fair price = index price * (1 + capital cost basis rate)