How much margin is required for a CoinEx contract to avoid liquidation?

To avoid liquidation on CoinEx, traders must maintain a margin balance that meets the formula: Required Margin = Position Size * Mark Price * Maintenance Margin Ratio.

Dec 02, 2024 at 12:12 pm

How much margin is required for a CoinEx contract to avoid liquidation?

Margin trading on CoinEx, like any other exchange, involves borrowing funds to increase your trading capital and potentially amplify your profits. However, it also magnifies your potential losses, and if your trade moves against you, you may face liquidation.

Liquidation occurs when your margin balance falls below a certain level, known as the maintenance margin. At this point, CoinEx will automatically close your position to cover its losses. To avoid liquidation, it's crucial to maintain a sufficient margin balance relative to your position size.

The formula for calculating the required margin

To determine the exact margin required to avoid liquidation on CoinEx, you need to consider the following factors:

• Position Size: The number of contracts you're trading.
• Mark Price: The current market price of the underlying asset.
• Maintenance Margin Ratio: The minimum margin balance required to maintain your position, expressed as a percentage.

The formula for calculating the required margin is:

Required Margin = Position Size * Mark Price * Maintenance Margin Ratio

Step-by-Step Guide to Calculating Required Margin

Follow these steps to calculate the required margin for a CoinEx contract:

1. Determine Your Position Size: Calculate the number of contracts you intend to trade. For instance, if you want to trade 10 BTC contracts, your position size would be 10.
2. Identify the Mark Price: The mark price is the reference price used by CoinEx to determine your liquidation level. You can find the mark price on the CoinEx trading interface. For example, if the mark price of BTC is $20,000, note this value.
3. Check the Maintenance Margin Ratio: This ratio varies depending on the contract type and leverage used. For perpetual contracts with 10x leverage, the maintenance margin ratio on CoinEx is typically 10%.
4. Calculate the Required Margin: Plugging in the values from steps 1-3 into the formula, you get:

Required Margin = 10 (position size) * $20,000 (mark price) * 10% (maintenance margin ratio) = $20,000

Therefore, to avoid liquidation on a CoinEx contract with 10x leverage and a position size of 10 BTC contracts, you would need to maintain a margin balance of at least $20,000.

Conclusion

Calculating the required margin for a CoinEx contract is essential for managing your risk and avoiding liquidation. By following these steps and understanding the underlying formula, you can ensure that you have sufficient margin to withstand market volatility and protect your trading capital.