Futures

Bitget: How to calculate the liquidation price of USDT-M Futures

2024-11-12 14:06023

USDT-M Futures is a popular financial derivatives in the cryptocurrency trading market. Due to the inherent complexity of derivatives compared to other products, understanding how to calculate the liquidation price of USDT-M Futures is crucial for investors. It helps them manage risks more effectively and avoid liquidation due to price fluctuations. This article provides a detailed guide on how Bitget calculates the liquidation price for USDT-M Futures.

1. Basic concepts of USDT-M Futures

USDT-M Futures are futures contracts that use USDT as both the margin and settlement currency. When opening a position, investors must deposit a certain amount of USDT as margin. If market price fluctuations cause the margin to drop below the required amount, liquidation may be triggered.

2. Factors in liquidation price calculation

Three factors are involved in triggering liquidation: your margin, maintenance margin rate, and position value.

1. Margin

Margin is the amount deposited by the investor when opening a position to ensure contract fulfillment. The amount of margin depends on the leverage and trade size chosen by the trader.

For example, if a trader selects 10x leverage and trades 1000 USDT, then the margin is 100 USDT.

2. Maintenance margin rate

The maintenance margin rate is a minimum margin percentage set by the trading platform. Liquidation triggers when an investor's margin falls below this level.

3. Position value

Position value refers to the current market value of the position held by the investor. Position value = position size × current price. For instance, if an investor holds 10 BTC in BTCUSDT futures, and the current BTC price is 50,000 USDT, the position value is 10 × 50,000 USDT = 500,000 USDT.

3. Liquidation price calculation

Liquidation price = (entry price × position size + margin) ÷ (position size × (1 – maintenance margin rate))

For example, an investor opens a BTCUSDT position of 10 BTC at the price of 50,000 USDT with a margin of 10,000 USDT and a maintenance margin rate of 10%.

Liquidation price = (50,000 USDT × 10 + 10,000) ÷ (10 × (1 − 0.1)) = 56,666.67 USDT. This means that if the BTC price reaches 56,666.67 USDT, the investor will be subject to liquidation.

4. Important considerations

1. During periods of high market volatility, the liquidation price may fluctuate rapidly. Investors should monitor market conditions closely and adjust their positions or add margin as needed.

2. The liquidation price is only a projected value; in actual trading, it may be affected by factors such as transaction fees and slippage

3. Setting reasonable stop-loss and take-profit levels can help manage risk and avoid liquidation.

5. Conclusion

Understanding how to calculate the liquidation price for USDT-M Futures is an essential part of risk management for traders. By being familiar with this calculation, investors can better assess their trading risk and develop effective strategies to trade more securely in the cryptocurrency market. Investors should also continue monitoring market trends, improving their trading skills, and enhancing their risk awareness to navigate the complexities of the market environment.