Collateral & liquidations

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Leverage is based on collateral. Collateral is a sum of money that the Scalpex exchange reserves on your balance. We reserve collateral per position as follows:

  • Leverage x3 – collateral 33.3333%
  • Leverage x10 – collateral 10%
  • Leverage x100 – collateral 1%

The liquidation price is the price at which the collateral entirely covers a user’s losses +0.5% initial margin, which makes liquidation possible. In the case that liquidation happens at a better price than the bankruptcy price, funds go to the Scalpex Insurance Fund. When liquidation occurs with a loss of funds, the Scalpex Insurance fund is used to cover the loss.

If the mark price moves against the trader and reaches the Liquidation Price, the position is automatically taken by the liquidation engine. Your position is then lost (and so is your collateral), and the Scalpex liquidation engine will close it. This way, the liquidation engine helps traders avoid bankruptcy. You can not have a negative balance.

Once liquidation occurs – you will be notified by email. You can further view recent liquidation events in your list of trades.

Let’s understand how the liquidation price is calculated.

Let’s assume the current price is $10,000. You decide to go long with 0.1 contract and x10 leverage. Your collateral then is $100.

The bankruptcy price is 9001.9 (including taker fee of 0.02%). This price means that your $100 collateral entirely covers your loss.

The mathematical proof as to how the bankruptcy price leads to negative collateral:

(9001.9 – 10000) * 0.1 – Market Taker Fee = -99.81 – Market Taker Fee = -$100

We see that although the price didn’t fall by 10%, the loss is $100, because the system requires to make a trade to close the position.

The liquidation price formula then goes as follows:

Liquidation Price = Bankruptcy Price + Initial Margin Requirement (0.5%) = 9047.0

  • Please note that both – fees and initial margin percentages are subject to change. Kindly check contract specifications for exact numbers.

You take leverage x10, which means that the Scalpex engine takes $100 collateral.

Once the mark price drops below (9047.0), your loss equals your $100 collateral and your position is lost.

When the mark price of a contract falls below your liquidation price for longs, or rises above your liquidation price for shorts, the liquidation engine takes over your position.

In your trade history, the price the liquidated position is closed at is the liquidation price.

When liquidation occurs, all your orders for the contract will be cancelled.

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