Margin Trading Terms Explained
Key Terms
| Margin | The initial capital from your own resources used to open a margin trading position. It is the asset amount in your Margin Account before any loans, and acts as collateral for you to trade using leverage. |
| Margin Account |
A dedicated account for borrowing and trading with margin. There are two types of margin accounts: Cross Margin: Up to 5x leverage. This means you may borrow up to 4 times of your principal. Isolated Margin: Up to 10x leverage; the exact maximum leverage varies by trading pair. |
| Leverage | Leverage shows how many times larger your trading position can be compared to your margin. Margin × Leverage = Total Position Assets Determines the max borrowing limit, and hence the total assets for your position. |
| Profit and Loss (PNL) | Calculated as the difference in net asset value, between its current value and from when you first borrowed it. |
| Total Assets | The estimated sum of all assets, including both available and frozen assets. |
| Transferred Assets | Assets moved into your Margin Account from other accounts. |
| Transferrable Assets | Assets in your Margin Account that can be moved to other accounts. |
| Borrowed Assets | Assets acquired through P2P Lending for use in your Margin Account. |
| Available Assets | Assets in your Margin Account ready for trading, including both transferred and borrowed funds. |
| Frozen Assets | Assets in your Margin Account that cannot be used to place an order, typically because they are already being used for open orders. |
| Borrowing | When you loan assets to leverage your position. Done by using the assets that you've transferred into your Margin Account to borrow additional funds for a position. |
| Lenders and Borrowers |
Lender: The party providing the additional funds for leverage. Borrower: The loaning party who borrows the funds to increase their position. |
| Interest | The percentage fee for using assets over a period, paid from borrowers to lenders. |
| Principal and Interest | The original amount in the Margin Account, with any accrued interest. |
| Max Borrowable Amount | The highest amount that can be borrowed by your Margin Account. |
| Auto-Borrow and Auto-Repay |
Auto-Borrow: Once you set your leverage, the cryptocurrency required to complete your trade will be automatically borrowed just by placing your order. Auto-Repay: Automatically repays any outstanding liabilities first when assets are received from completed orders. Both functions can be toggled on or off as required. |
Cases Where Borrowing Fails
Be it auto or manual, borrowing may fail if:
- the cryptocurrency is delisted from the Margin Trading market.
- there is insufficient market depth.
- the loan amount exceeds the margin risk limits for the cryptocurrency.
Debt Ratio
| Debt Ratio |
The proportion of total debt to total assets in a Margin Account.
|
| Account Debt |
The sum of your borrowed funds plus accrued interest.
|
| Total Account Assets |
The mark price of all assets held in your Margin Account. ∑ (Total Held Assets × Their Mark Price) |
Managing Risk
Higher debt ratios indicate higher borrowing and greater risk of liquidation.
| Risk Level | Low | Mid | High |
|---|---|---|---|
| Debt Ratio | ≤ 60% | 60%–85% | > 85% |
To manage high risk, reduce your debt ratio. You can do this by:
1. Transferring more assets from other accounts into your Margin account.
2. Repaying borrowed cryptocurrency to clear part of your debt in advance.
Liquidation
| Reference Liquidation Price | The price at which the liquidation of your position occurs. A calculated estimate based on your Margin Account's total assets and debt, using the corresponding spot index price (BTC). Currently, only available in Isolated Margin mode. The liquidation price of each Isolated Margin Account is calculated independently, with no effect on any of the others. |
| Liquidation | Triggered when the debt ratio reaches 97%, leading to the selling of held assets to repay all debts and interest. When this happens, you'll be alerted via email, text and platform notifications. |
| Forced Liquidation | Happens in two scenarios: 1. When debt ratio reaches 97%, leading to the selling of a portion of assets to pay off debts and interest. 2. When interest payment fails, leading to a partial liquidation of assets to cover the hourly interest. The system takes control of and liquidates all positions to repay debts. Any remaining balance, after deducting a fee (about 1% of the total position value) to cover negative balance risks, is returned in USDT or the liquidated token. |
| Margin Risk Limits | A risk management measure to prevent significant losses from forced liquidation in volatile markets. To minimize trading risks, KuCoin's Margin Risk Limit sets caps on borrowing and buying amounts for each cryptocurrency, adjusting these limits periodically based on market conditions and risk policies. Has three components: Max Position Limit: The maximum holding limit for each cryptocurrency in a Margin Account. Max Borrowing Limit: The maximum borrowing amount for each cryptocurrency in the lending market. Max Buy-In: The maximum buyable amount for each cryptocurrency in margin trading. Note: The margin risk limits for Cross and Isolated Margins can be found here. Each master account on KuCoin can have 5 sub-accounts, each with 10% of the master account's limits. Example: If a cryptocurrency hits the max position limit, those with short positions can still purchase through the margin market to cover their debts. However, anyone else (such as those in long positions) won't be able to borrow or buy more of that token. |
| Risk Reserve Fund | Covers the shortfall when your account's remaining assets post-liquidation are still insufficient to repay debts. It is funded by a 10% interest fee from lenders whenever borrowers repay their liabilities. |