The auto margin addition function is a useful tool for traders who want to protect their isolated mode positions from liquidation. This function automatically adds margin to your positions, based on your available margin, when your positions are about to be liquidated.
Here's how it works: when you enable the auto margin addition function, your available margin will be used to add margin to your isolated mode position. The amount of margin added is equal to the position's maintenance margin. If your available margin is insufficient, your order will be cancelled to release some margin, and the remaining available margin will be added to the position's margin. This will cause the liquidation price to deviate further from the fair price.
1. Formula for Auto Margin Addition
The amount of margin added each time is calculated using the following formula:
USDT-M Futures: Amount of margin automatically added each time = Position Notional * Maintenance Margin Rate on the level of position notional - Maintenance Amount on the level of position notional
(Note: Position Notional = Mark Price * Position Amount)
2. Example: BTC_USDT Forward Contract
Let's say a trader opens a long position of 1.5 BTC with 10x leverage when the price of BTCUSDT Perpetual is 25,000.0 USDT. The estimated liquidation price is 22,590.3 USDT, and the trader has 200 USDT of available margin.
If the fair price falls to 22,590.3 USDT, the auto margin addition process will take place to prevent the position from being liquidated. Based on the auto margin addition formula, the amount of margin to be added is 135.5418 USDT, and the new liquidation price after margin addition is 22,499.6 USDT. This prevents the liquidation of the user's position.
If the price of BTCUSDT continues to fall and reaches the new liquidation price of 22,499.6 USDT, the auto margin addition process will take place again. However, only the remaining 64.4582 USDT of the available margin can be added. If the amount of margin to be added is lower than the available balance, the margin can be added as usual. Otherwise, the remaining 64.4582 USDT of the available margin will be added, and the new estimated liquidation price will be calculated.
3. Important Notes
Here are some important notes to keep in mind:
When liquidation is triggered, the system will first cancel all unfilled active orders to release more margin to prevent liquidation.
Auto margin addition is only effective in isolated margin mode. The function is not supported in cross margin mode.
These rules are part of OrangeX's User Agreement and have the same legal effect as the User Agreement.