Introduction of Margin
A. Spot margin trading
Spot margin trading uses
Spot margin trading refers to the use of own principal to borrow crypto for two-way trading to leverage more funds. You can profit from rising price of crypto by opening long position, or profit from falling price of crypto by opening short position. The maximum leverage is 10 times your principal, which will magnify your profit ten times. And the loss will also be magnified. Please be aware of the risk when using margin trading.
Margin trading is under margin mode, and not supported in Simple mode, so users can upgrade accounts and select account mode to start margin trading. Margin trading supports both isolated and cross margin modes. In the isolated margin mode, the positions are isolated, which can reduce position risks; in the cross margin mode, the margin is shared across accounts which will improve the utilization of funds. The detailed rules are as follows:
B. Spot margin trading and risk control
Select position type in margin trading page, then click buy or sell to start spot margin trading.
Followings are term explanations related to margin trading, risk control rules, etc.
In trading zone, you can select leverage, order price and amount to buy (long) or sell (short).
The leverage multiplier affects the Available to borrow. If the margin is sufficient and the trigger limit is not reached, the Available to borrow equals the margin balance multiplied by the leverage multiplier.
For example, the current value of ETH is 1,000 USDT, and 1 ETH in the account. If you are optimistic about the ETH market, you can buy (long). Use 1 ETH as the margin asset, open a 5x leveraged order, and borrow up to 5,000 USDT to buy 5 ETH. Position at this time is:
The asset is 6 ETH (including the margin balance of 1 ETH, the margin is not traded in the transaction). Liability is 5,000 USDT.
If you close the position at 2,000 USDT and sell 2 ETH, the debt of 4,000 USDT will be automatically repaid, and the position will be:
The asset is 4 ETH, liability is 1,000 USDT.
When the liability is paid off, the position will automatically disappear.
Margin trading uses margin logic, the system calculates the maximum borrow amount and maintenance margin rate according to the leverage times you set:
|Long position: Maintenance margin = (Debt + Interest) * Maintenance margin / Mark price
Short position: Maintenance margin = (Debt + Interest) * Maintenance margin * Mark price
|Long position: Margin rate = [Asset in position - (Debt + Interest) / Mark price] / (Maintenance margin + Commission fee)
Short position: Margin rate = [Asset in position - |Debt + Interest| * Mark price] / (Maintenance margin + Commission fee)
The higher the leverage times set and the larger the borrowed amount, the easier it is to trigger a liquidation alert.
When the margin rate < 300%, the system will send out a partial liquidation warning to account, and you need be aware of the liquidation risk.
When the margin rate < 100%, the position will trigger forced liquidation, and the reverse pending order of your position will be canceled. Some or all of your isolated margin positions will be handed over to the liquidation engine. The liquidation engine will put position assets into liabilities according to certain rules, to repay the debt until the account becomes safe.
The liabilities incurred under the cross and isolated positions will be calculated and deducted respectively, and the interest will be repaid first;
The interest is accumulated and recorded on the hour, and the interest is deducted every hour on the basis of 0:00. It’ll take around 5 minutes to record accrued interest. Any liabilities that are incurred during this period will be recorded as well.
For example: when the user borrows crypto at 22:55, the interest will not be recorded. At 23:00, the interest is calculated through the interest-bearing debt, and at 23:00, the interest is deducted. If the user returns the debt at 22:57, no interest will be generated.
C. Margin Position Tier Rules
Based on market liquidity, OKX position tier rules require different margin ratios and allow variable position limits for different leverages that users select.
When you choose high leverage, market volatility may cause liquidation engines to consume all the maintenance margin before the liability is repaid, thus leading to a clawback. To avoid this, OKX will limit the maximum borrowing amount when you choose high leverage. In other words, the higher the leverage, the lower the maximum borrowing amount.
Therefore, when you have sufficient funds available, the amount you can trade may be smaller than your available funds if you choose high leverage. A larger order can be placed instead if the leverage multiplier is appropriately lowered.