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 borrowings/lendings and margin trade.
2. Margin multiples: In our platform model, it refers to the maximum multiple that can be borrowed.
If the margin ratio is 10 times, one time of principal and 9 times of loan can be used.
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 token.
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. Capital: 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
Lender： It means that after the loaned token is repaid, the principal and interest will be automatically borrowed.
Borrower：When the loaned token is almost due, it will automatically borrow another one in the market to maintain the existing trade.
17. Long: Take BTC/USDT as an example, a price rise forecast of BTC from the user will lead a USDT to borrow operation to buy BTC, with a wish that the BTC will go up soon so the user can sell it and then pay back the borrowed USDT to make interest.
18. Short: Take BTC/USDT as an example, a price fall forecast of BTC from the user will lead a BTC to borrow operation to buy USDT, with a wish that the BTC will go down soon so the user can buy it back and then pay back the borrowed BTC to make interest due to spare BTC.
19. Debt ratio: The debt ratio is defined as the ratio of total debt to total assets (converted to BTC for calculation).
If the debt ratio is greater than 95%, the system will send liquidation alert to you. If the debt ratio exceeds 97%, the system will automatically liquidate the account for repayment.
20. Estimated liquidation price: The price calculated according to 97% of the debt ratio indicates that the price will trigger a short position when the price reaches this data.
21. Liquidation: When the asset price changes, resulting in that all assets of the user can only repay the principal and interest of the loan or a little residual risk, the system will trigger the forced close-out and repay the principal and interest of the closed assets.
When the risk rate is greater than or equals to 97%, the liquidation will be triggered.
22. Stop out(forced liquidation): It means that the system forces the user to execute the trade action.
Two scenarios for Stop Out:
1) Your position reaches the condition of liquidation
2) Automatic renewal of loan is blocked when it is due (debt ratio ≥ 97% or the platform does not have funds for automatic renewal)
23. Negative balance: After the liquidation, the remaining assets in the user's margin account are insufficient to repay the loan principal and interest.
24. Provisions of risk: The failure of a borrower to repay the loaned principal and interest in full due to its negative balance will cause a supplement by the risk reserve for the rest part of assets.
If the risk reserve is insufficient, or the currency balance corresponding to the risk reserve is insufficient, it will not be supplemented.