This user manual explains the terms and calculation rules related to leverage trading: including available balance, available order amount, long and short, margin rate, liquidation, interest calculation and lending rules, etc. For easier understanding, we take BTC/USDS as an example, same as other trading pairs. Among them, BTC on the left of the trading pair is called the trading instrument, and the USDS on the right is called the basic trading instrument.
Available balance: the balance of user’s leveraged assets that users can use for transferring in and out, and making trading orders. It increases after transfer in, and decreases after transfer out.
Maximum amount available to borrow = (total available assets converted into USDS - unpaid borrowed assets - outstanding interest) * (multiple - 1) - borrowed money converted into USDS. This is a uniformly calculated value and does not distinguish between coins.
Maximum to buy/sell = available balance + maximum loanable amount. This needs to distinguish between coins, and trading instruments and basic coins are different.
|Available amount to order||Equation||The initial state|
|When users buy||the maximum amount of USDS that users can borrow + available USDS||the maximum amount of USDS that users can borrow|
|When users sell||the maximum amount of USDS that users can borrow converted into BTC + available BTC||the maximum amount of USDS that users can borrow converted into BTC|
Borrowings : When placing an order, the available balance will be deducted first, and after that, the maximum loanable amount will be deducted. After deducting the maximum loanable amount, then it is a loan, and the loan amount is increased. For instance, the borrowing amount = the actual used amount of the order - the available amount used for the order.
The minimum and maximum order amount, the rules are the same as Instant Exchange, except that the amount available for order placement is not the user's wallet balance, but the available balance of that particular coin that users want to trade.
Long and short
low-multiple spot leveraged products are a tool for obtaining higher returns through assets that are several times more than principal. Besides, users can use leverage to hedge against risks of holding spots, or they can be used to pursue higher returns. At the same time, the risk will be higher than spots.
Long: User transfers to BTC or USDS, then it will be redirected to the trading page, choose the leverage multiple above the slide, slide to buy BTC. When the price of BTC/USDS increases, selling it can make profit after the principal and interest of the USDS borrowed are repaid. However, if the price drops below the initial purchase price, users will suffer a loss.
Short: The user transfers to BTC or USDS, then it will be redirected to the trading page, choose the leverage multiple above the slide, slide to sell BTC. When the price of BTC/USDS decreases, buying it can make profit after the principal and interest of the USDS borrowed are repaid. However, if the price increases above the initial purchase price, users will suffer a loss.
Margin rate = (total assets - total liabilities) / total liabilities
= total available assets converted to USDS - total borrowed amount - total interest / (total borrowed amount + total interest) converted to USDS * 100%
There is an exceptional case. when the liability is 0 , The margin ratio does not exist, it shows – both
assets and liabilities have only trading instruments or only the basic coins, and assets > liabilities, the margin ratio does not exist, shows –
Definition of [ Maintenance Margin Ratio ] : When the user’s leveraged assets have fallen close to the leveraged liabilities, in order to guarantee the repayment of the loan, when the margin rate ≤ the minimum maintenance, the liquidation will be triggered. Margin rate is calculated for full position. Take BTC/USDS as an example as shown in the figure below:
|Risk level||Remarks on|
|–||–||When the borrowed amount is 0, or both assets and liabilities have only trading varieties or only basic coins, and when assets> liabilities|
|(0, 3%),||high risk||≤ 3%, Forced liquidation should be triggered|
|[3%, 50%) The||dangerous||has entered the dangerous zone, and there is a risk of closing the position|
|[50%, 100%)||Safe||Relatively safe|
|[100%, +∞)||Very good||Good control of risk|
|Closing risk rate||3%|
|Release risk rate||100%|
BTC/USDS The maintenance margin rate is 3%, and the margin release rate is 100%, which may be adjusted depending on the situation. The higher the margin release rate, the smaller the amount that users can transfer out, and the lower the risk of the margin account.
Liquidation price is the price when the margin rate of the trading pair has changed or has fallen below the maintenance margin rate.
Liquidation price = [(available USDS - borrowing USDS-interest USDS) - maintenance margin rate*borrowing USDS] / [maintenance margin rate*borrowing BTC - (available BTC - borrowing BTC - interest BTC)]. The actual rates are different among different coins, depending on how rates are displayed on the page.
What would happen after a forced liquidation occurs: When the market price has reached the liquidation price, forced liquidation would occur.
1. Repayment of interest by coins
2.Repayment of loan principal by currency
3.If a forced liquidation happens, when the borrowed available balance in the denominated coins is insufficient, the equivalent amount of coins will be automatically deducted from the leverage account at the market price.
4.If the liquidation loss cannot be covered by the assets in the margin account after deduction, funds will be drawn from the risk reserve of Bixin for repayment.
The amount that can be transferred out
The amount that can be transferred out is the owner's equity = assets - liabilities. At the same time, it is necessary to consider the control of the margin rate to ensure that after the transfer out, it will not be insolvent and will not be almost close to liquidation.
The maximum transferable amount = the available balance of the currency ∩ (net assets - borrowed amount * margin release rate)
so USDS transferable amount = leveraged net assets equivalent to USDS - leveraged liabilities equivalent to USDS * margin release rate, and ≥ 0.
=User USDS available balance∩ [total available assets converted to USDS - (borrowing amount converted to USDS + outstanding interest converted to USDS) * 100%], and ≥ 0. ∩ means to take the minimum of the two.
BTC transferable amount = [Leveraged net assets equivalent to USDS - Leveraged liabilities equivalent to USDS*margin release rate]/price, and ≥0.
=User BTC available balance∩[total available assets equivalent to USDS-(borrowing amount equivalent to USDS + outstanding interest equivalent to USDS)*100%)]/price, and ≥0. ∩ means to take the minimum of the two.
Interest and interest rate
Interest = loan amount * daily interest rate * days.
The number of days is calculated as UTC+8 natural day, less than one day is calculated as one day, and interest is calculated in the early morning of each day.
Interest is calculated on a daily basis, and the object of interest is the loan amount, and the interest is calculated separately for the two coins. The interest rate will be adjusted according to market supply and demand , depending on how rates are displayed on the page.
Article is closed for comments.