EXAMPLE 1 - Buying 1 BTC at $4000 at 25x leverage rate, borrowing $4000 at daily rate 0.04%, trading fee 0.1%
Let's say that trader's balance before the trade is $300. To start the trade, trader must have at least $4000 / 25 = $160 as margin, plus some more to pay fee (if applicable) and interest.
Trader takes up a loan of $4000 at 0.04% and pays first interest, $1.6.
Trader uses this $4000 to buy 1 BTC and pays trading fee for the buying execution, $4.
Supposing that market bid is now $4100, trader's account details are as follows:
Available margin / used margin = [ Balance - Used Margin + PnL ] / Used Margin
[ 294.40 - 160 + 100 ] / 160 = 146.5%
- P&L: $100
- Balance: $294.4 (balance before trade, minus interest and trading fee)
- Used margin: $160
- Available margin: $234.4 (balance minus used margin, plus P&L)
- Available margin / used margin: 146.5%
If trader closes the trade now, they sell the 1 BTC that was bought from the beginning with loan money, and pay trading fee again, now $4.10, for the selling execution. With $4100 made from selling 1 BTC, they pay off the $4000 loan. In total, they pay $1.6 interest and $8.10 trading fee, to have gotten a profit of $100. Their final balance is $390.30
If trader decides to hold onto the trade to the next day, more interest will be deducted as it is a daily fee.
Supposing that market bid is now $3900, trader's account details are as follows:
Available margin / used margin = [ Balance - Used Margin + PnL ] / Used Margin
[ 294.40 - 160 - 100 ] / 160 = 21.5%
- P&L: -$100
- Balance: $294.4 (balance before trade, minus interest and trading fee)
- Used margin: $160
- Available margin: $34.4 (balance minus used margin, plus P&L)
- Available margin / used margin: 21.5%
- Note : Liquid UI will show as 120% and 110%, the calculation here means your coverage is at 21.5% + 100% = 121.5%. If this margin coverage drop below 110%, your position will be force liquidated by the system. Example : Your available / used margin calculation is -30%, this would mean -30% + 100% = 70%, which the system will triggered the liquidation as it's below 110%.
If the ratio is below 20%, system will issue a margin call warning email. If trader closes the trade now, after selling 1 BTC and paying off its trading fee and the loan, trader will have taken a loss of $100. Their final balance is $190.50
If trader decides to hold onto the trade to the next day, more interest will be deducted as it is a daily fee.
If due to some reason available margin gets below 10% (market bid getting too low or trader doing some more trades that deplete their balance), forced liquidation will occur.
EXAMPLE 2 - Selling 1 BTC at $4000 at 25x leverage rate, borrowing 1 BTC at daily rate 0.02%, trading fee 0.1%
Short trades are a bit more complicated because trader has to pay back their loan in base currency, and to do so they have to use quote currency to buy base currency first.
Let's say that trader's balance before the trade is $300. To start the trade, trader must have at least $4000 / 25 = $160 as margin, plus some more to pay fee (if applicable) and interest.
Trader takes up a loan of 1 BTC at 0.02% and pays first interest, 0.0002 BTC. They have to use quote currency (in this case USD) to buy 0.0002 BTC at market ask to pay.
Trader uses this 1 BTC to sell for $4000 and pays trading fee for the buying execution, $4.
Supposing that market ask is now $3900, trader needs to spend $3900 * 0.0002 = $0.78 to buy 0.0002 BTC and pay interest. Trader's account details are as follows:
Available margin / used margin = [ Balance - Used Margin + PnL ] / Used Margin
[ 295.22 - 160 + 100 ] / 160 = 147.0125%
- P&L: $100
- Balance: $295.22 (balance before trade, minus interest and trading fee)
- Used margin: $160
- Available margin: $235.22 (balance minus used margin, plus P&L)
- Available margin / used margin: 147.0125%
If trader closes the trade now, they buy back 1 BTC with the $4000 from the first selling execution and pay trading fee again, now $3.90, for the selling execution. Then they can pay off the loan with 1 BTC. In total, they pay $0.78 interest and $7.90 trading fee, to have gotten a profit of $100. Their final balance is $391.32
If trader decides to hold onto the trade to the next day, more interest will be deducted as it is a daily fee. In the case of short trades, interest changes according to market ask.
Supposing that market bid is now $4100, trader's account details are as follows:
Available margin / used margin = [ Balance - Used Margin + PnL ] / Used Margin
[ 295.22 - 160 - 100 ] / 160 = 22.0125%
- P&L: -$100
- Balance: $295.22 (balance before trade, minus interest and trading fee)
- Used margin: $160
- Available margin: $35.22 (balance minus used margin, plus P&L)
- Available margin / used margin: 22.0125%
- Note : Liquid UI will show as 120% and 110%, the calculation here means your coverage is at 22.0125% + 100% = 122.0125%. If this margin coverage drop below 110%, your position will be force liquidated by the system. Example : Your available / used margin calculation is -30%, this would mean -30% + 100% = 70%, which the system will triggered the liquidation as it's below 110%.
If the ratio is below 20%, system will issue a margin call warning email. If trader closes the trade now, after buying 1 BTC at market bid and paying off its trading fee ($8.00) and the loan, trader will have taken a loss of $100. Their final balance is $191.22
If trader decides to hold onto the trade to the next day, more interest will be deducted as it is a daily fee. In the case of short trades, interest changes according to market ask.
If due to some reason available margin gets below 10% (market bid getting too low or trader doing some more trades that deplete their balance), forced liquidation will occur.