1.About Auto Margin Addition Function
Auto margin addition is a function that allows traders to automatically add margin to their existing positions to prevent liquidation. Once the auto margin addition function is enabled, your available margin will be automatically added to your position when liquidation is about to be triggered.
The amount of margin automatically added each time is the amount of the position's maintenance margin. If the available margin is insufficient, the user's order will be canceled, as a preferred method, to release a certain amount of margin, and the remaining available margin will be added to the position's margin. Once margin is added, the liquidation price will deviate further from the fair price.
2.Formula for Auto Margin Addition
a. USDT-M Futures:
Amount of margin automatically added each time = Entry price * Quantity * Size * Maintenance margin rate
b. Coin-M Futures:
Amount of margin automatically added each time = Quantity * Size * Maintenance margin rate / Entry price
3.Example (using forward contract BTC_USDT ):
A trader opens a long position of 5,000 cont. with 10x leverage when the price of BTC_USDT is 18,000 USDT. The estimated liquidation price is calculated to be 16,288.98 USDT, whereas the available margin the trader has is 50 USDT.
If the fair price falls to 16,288.98 USDT, which is the liquidation price, the auto margin addition process will take place in order to prevent the position from being liquidated. Based on the auto margin addition formula above, we calculate that the amount of margin to be added is 36 USDT, and the new liquidation price after margin addition is 16,188 USDT. By doing so, liquidation of the user's position can be prevented.
If the price of BTC_USDT continues to fall and reaches the new liquidation price of 16,188 USDT, auto margin addition process will take place again. However, this time, only the remaining 14 USDT of the available margin can be added. If the amount of margin to be added is lower than the available balance, the margin can be added as per usual. Otherwise, the remaining 14 USDT of the available margin will be added, and the new estimated liquidation price will be calculated.
a. When liquidation is triggered, the system will first cancel all unfilled active orders to release more margin to prevent liquidation.
b. Auto margin addition is only effective in isolated margin mode. The function is not supported in cross margin mode.
These rules are part of our platform's User Agreement and have the same legal effect as the User Agreement.