Mark Price, Auto-Deposit Margin and Liquidation

What is Mark price?

In traditional markets, a position is usually marked to the last trading price (i.e., mark to market), on which unrealized Pnl and liquidation triggering depend. However, unnecessary liquidation may occur if the market is being manipulated, is illiquid or the Mark Price swings significantly relative to its Index Price. KuCoin Future utilizes a system called Fair Price Marking to avoid the situations above. This system sets the Mark Price of the Future to the Fair Price instead of the last trading price.

Fair Price Marking only affects the liquidation price and unrealized Pnl. Realized Pnl is not affected.

When the index price behaves abnormally, the marking method will be changed temporarily to use the depth-weighted bid price and depth-weighted selling price of the order to generate a new marked price through a reasonable algorithm.

 

What is Auto-Deposit Margin?

When Auto-Deposit Margin mode is enabled, funds in the Available Balance will be added to the existing position whenever liquidation happens, trying to prevent the position from being liquidated. This mode is useful for users who are hedging existing positions.

Traders may choose to enable the “Auto-Deposit Margin” mode in the “Positions" panel.

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Differences Between Auto-Deposit Margin and Cross Margin:

Auto-Deposit Margin utilizes the fixed amount of margin of the position to calculate the liquidation price. Only when the mark price reaches the liquidation price, will the system add margin from the available balance to the position and recalculate the liquidation price based on the current margin.

Different from the Auto-Deposit Margin, the Cross Margin utilizes the full amount of margin in the available balance for the liquidation price calculation and the margin amount may increase or decrease as the mark price changes. The added margin to the position will not be scaled down if there's no profit in the position.

 

What is Liquidation? Why I get liquidated?

To keep the positions open, traders are required to hold a percentage of the value of their position, i.e., the Maintenance Margin percentage. If a trader fails to fulfill the maintenance requirement, his/her position will be taken over by the liquidation engine and gets liquidated, and the maintenance margin will be lost.  

Traders could check the maintenance margin percentage at Future Specifications

The calculation of the maintenance margin is based on the average entry price and the position leverage. Traders shall take notice of the price gap of the liquidation price and the mark price. If the mark price reaches the liquidation price, the position will be taken over by the liquidation engine and get liquidated.

If the account balance falls into a negative balance, the insurance funds will be applied to cover the cost, but if the insurance funds are not sufficient to cover the extra cost of the liquidation, the ADL will be triggered therefore guarantee that the trader will only lose the fixed amount of margin.

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