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

Coin-M Futures is a popular financial derivative in the cryptocurrency trading market. Due to the inherent complexity of derivatives compared to other products, understanding how to calculate the liquidation price of Coin-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 Coin-M Futures.

1. Basic concepts of Coin-M Futures

Coin-M Futures are futures contracts that use specific cryptocurrencies (such as BTC, ETH) as margin and settlement units. When opening a position, investors must deposit a certain amount of the specific cryptocurrency as margin. If market price fluctuations cause the margin to drop below the required amount, liquidation may be triggered.

2. Factors in calculating the liquidation price

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

1. Margin

￮ The margin is the amount of cryptocurrency deposited when an investor opens a position. This amount depends on the leverage and trading volume selected by the investor.

￮ For example, if a trader selects 5x leverage with a trading volume of 10 BTC, the margin amount may be set to a certain amount of BTC based on specific rules.

2. Maintenance margin rate

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

3. Position value

￮ Position value refers to the current market value of an investor's futures position. It is calculated as the number of futures multiplied by the corresponding cryptocurrency price.

￮ For example, if an investor holds 50 ETH in ETHUSD futures and the current ETH price is 3000 USD, the position value is 50 × 3000 USD = 150,000 USD.

3. Liquidation price calculation

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

For example, an investor opens a Coin-M Futures short position in ETHUSD with an average entry price of 2400 USD, a margin of 300 USD, a position size of 1 ETH, and a maintenance margin rate of 0.5%. Liquidation price = (2400 × 1 + 300) ÷ [1 × (1 – 0.5%)] ≈ 2701 USD.

Bitget recommends using a futures calculator to calculate price target, liquidation price, and average price. Note that the price or value calculated by the calculator is for reference only and does not include actual transaction fees or other costs.

4. Practical application notes

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 Coin-MFutures is an essential part of risk management for traders. By mastering this liquidation price 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.