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MCS | Find The Liquidation Price in The Bitcoin Margin Trading

16 days ago

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*This post has been written by Hedgehog, an MCS influencer and one of Korea's famous cryptocurrency key opinion leaders.

#Be_a_Trader!

Greetings from MCS, the derivatives trading platform where traders ALWAYS come first.

If you are trading Bitcoin with margin, you may have wondered what the liquidation price is when you enter a position. Today, I am going to share with you how you can easily calculate the liquidation price for your position before you 'actually' own the position.

But before I get into the math, I would like to start off with the concept of the liquidation price in Bitcoin margin trading for the new MCS traders who recently joined the market.

🎯 What is Liquidation?

Liquidation in Bitcoin margin trading is an automatic position liquidation process triggered when the maintenance margin of a position held is lower than 0.5% of the position value, and when the mark price reaches the liquidation price.

🎯 What is a Liquidation Price ?

A liquidation price is calculated based on leverage, entry price, and maintenance margin rate. For a long position, MCS uses the following formula:

Liquidation Price (Long) = (Entry Price * Leverage) / {Leverage + 1 - (Maintenance Margin Rate * Leverage)}

It might not be easy to fully understand just by looking at the formula. Let's look at an example below!

Example) If you want to open a long position at a price of 10,000 dollars using 10x leverage, the liquidation price of this position is as follows:

Liquidation Price = (10,000 Entry Price) * 10 Leverage) / {10 Leverage + 1 - (0.005 Maintenance Margin Rate * 10 Leverage)}

By putting the numbers from the example into the formula, you can easily calculate the liquidation price of $9,132.42!

     

Super easy, right? Conversely, in the case of a short position, you can calculate the liquidation price using the formula below:

Liquidation Price (Short) = (Entry Price * Leverage) / {Leverage - 1 + (Maintenance Margin Rate * Leverage)}

Example) If you want to open a short position at a price of 10,000 dollars using 10x leverage, the liquidation price of this position is as follows:

Liquidation Price (Short) = (10,000 Entry Price * 10 Leverage) / {10 Leverage - 1 + (0.005 Maintenance Margin Rate * 10 Leverage)}

Liquidation Price (Short) = $11,049.72

Calculating the liquidation price for short is also a walk in the park!

     

Using these two formulas above, you can anticipate the liquidation price before opening a position, so I strongly recommend all MCS traders to keep these formulas in mind and use them. Or you can just simply use the calculator feature available on MCS.

   

I am a Bitcoin margin trader, Hedgehog. Thank you for reading this post.

             

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Traders ALWAYS come first on MCS.

Thank you.

           

START TRADING

   

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Published 16 days ago