Why is fair price used to calculate PNL and liquidation price?
In order to improve futures market stability and reduce unnecessary liquidations in the event of abnormal market volatility, MEXC perpetual futures adopts a uniquely designed fair price marking system. Without this system, there may be unnecessary deviation of the intraday price from the price index due to market manipulation or lack of liquidity, resulting in unnecessary liquidations.
Fair price marking system
For perpetual futures, the fair price is equal to the price index of the underlying futures plus the basis moving average that decreases over time.
Also, please note that this price only affects the liquidation price and the unrealized PNL. It does not affect the realized PNL.
Note: This means that you may see a positive or negative unrealized PNL immediately after your order is executed. This is due to the slight deviation of the fair price from the filled price. This is normal and does not imply that you have lost your funds, but please make sure to keep an eye on your liquidation price to prevent premature liquidation of your position.
Perpetual futures fair price calculation
Fair price = Spot index price + Basis moving average
Basis moving average
= Moving average (Average of best ask price and best bid price - Spot index price)
= Moving average ((Best ask price - Best bid price) / 2 - Spot index price)
The fair price takes into account both the spot index price and the basis moving average. The moving average mechanism smoothes and filters futures price fluctuations over short periods of time, reducing unnecessary liquidations caused by abnormal volatility.