Margin Trade refers to a trade mode in which users borrow a certain amount of digital tokens by pledging digital tokens in KuCoin to make a long (buy) / short (sell) operation, so as to leverage large funds with small funds to earn more profits.
Explanation of relevant terms:
1. Margin account: Accounts for margin borrowing and margin trading.
2. Margin multiples: Indicates the multiple relationship between the total assets in the margin account and the principal. The maximum leverage determines the user's current maximum borrowing amount. The current model of the platform is a fixed cross margin with a maximum leverage of 10 times, that is, the user can use the principal to borrow up to 9 times loan.
3. Estimated value: Sum of value, including available assets + frozen assets
4. Transferred assets: Assets transferred from other accounts to margin accounts
5. Borrowed assets: Assets in the margin account which is borrowed through borrowing
6. Available assets: Assets in the margin account that can be used to place an order, including transferred in and borrowed
7. Transferable assets: Assets in the margin account that can be transferred to other accounts.
8. Frozen assets: Assets in the margin account that cannot be used to place an order. Generally, it refers to the assets in the open order
9. Borrow: It refers to the behavior that users use the transferred assets in the margin account to borrow tokens.
10. Lender: Margin assets provider
11. Borrower: Margin assets users
12. Interest: Interest is the usage fee of assets in a certain period of time. It refers to the remuneration that the currency holder (the creditor) gets from the borrower (the debtor) because of lending currency or monetary capital.
13. Principal: Refers to the original token amount before borrowing
14. Principal and Interest: Principal and interest combine
15. Maximum borrowable amount: The maximum amount that a margin account can borrow
16. Auto-renew: When the borrower's debt is about to expire, the system will automatically borrow the same amount of the corresponding debt assets (which equals the remaining mature debt’s principal and interest) to continue the debt if there are insufficient corresponding assets in the borrower's account. The auto-renew function will be failed in the following situations:
16.1 The system will detect whether the current debt ratio in the borrower's account is lower than 96% before executing the auto-renew. If negative, the system will fail to execute the auto-renew procedure.
16.2 The token has been delisted from the current funding market.
17. Long: Taking BTC/USDT as an example. If the user predicts that the price of BTC will rise, he can borrow USDT to buy BTC via the margin trade, then sell the BTC back to USDT after BTC price rises to take profits (The remaining USDT after repaying all the principal and interest are the profits).
18. Short: Taking BTC/USDT as an example. If the user predicts that the price of BTC will drop, he can borrow BTC and sell it to USDT via the margin trade, then buy the BTC back with the USDT after BTC price drops to take profits ( The remaining USDT after repaying all the principal and interest are the profits)
19. Debt ratio: The debt ratio = the total debt/total assets in the margin account.
Debt: Debt= Sum( the principal and interest of the debt assets * mark price)
Total assets in the margin account = Sum(Holding assets' amount * mark price)
The higher the debt ratio is, the higher the proportion of borrowed assets is. And the greater the risk is, the easier it is to get liquidated.
20. Reference Liq. Price: The reference liquidation price is calculated based on your balance and liabilities in your margin account as well as the corresponding spot index (BTC). This liquidation price is for reference only, as in the cross margin mode, the liquidation price of different cryptos would effect each other mutually.
21. Liquidation: A forced liquidation will be triggered when the mark price of your holding assets and debt assets changes resulting in the debt ratio reaching 97%. The system will trade the holding assets to the debt assets in order to repay all the principal and interest. Liquidation will be ended if all debts are paid off or all assets are sold out. If it still can't cover the debts, your account will execute the negative balance procedure.
22. Forced liquidation: Which means the system will close the position in your margin account automatically in the following situations.
There are two situations for forced liquidation:
a.When the debt ratio reaches 97%, forced liquidation is triggered, the coin of the highest value estimated in BTC will be liquidated firstly according to the mark price to repay until it pays off the corresponding debt.
b.The system will partially liquidate the borrower's margin position to repay the mature debt if failed to execute auto-renewing. The coin of the highest value estimated in BTC will be liquidated firstly according to the mark price to repay until it pays off the corresponding debt.
23. Negative balance: The system will trade the holding assets to the debt assets in order to repay all the principal and interest. Liquidation will be ended if all debts are paid off or all assets are sold out. If it still can't cover the debts, your account will execute the negative balance procedure. During the negative balance procedure, the borrower's account will show a negative balance (the debt ratio is higher than 100%). At the same time, the withdrawal function of the whole account (including main account and Futures account) will be suspended. (If a negative balance procedure triggered in the sub-account, the withdrawal function of the master account will be suspended) The withdrawal function will be recovered automatically till users pay off the negative balance by transferring corresponding assets from other accounts into the margin account.
24. Insurance funds: The insurance funds are the backup for the negative balance conditions in the margin market. If the negative balance procedure is triggered, the remaining debts will be covered by the insurance funds first to protect the interest of the lender. It won’t be fully covered if there are insufficient corresponding assets to repay all the debts.
The insurance fund is 10% of the interest when the borrower repaying the liabilities.