Minimizing Liquidation

Dual Price Mechanism

The dual price mechanism is a system that protects traders from malicious price manipulation by setting the mark price as the trigger for the liquidations. Mark Price* is made up of the global spot price index* and funding basis rate, in other words, a real-time spot price on major cryptocurrency exchanges. This prevents unfair liquidations caused from market manipulation, lack of liquidity, or deviation of spot and futures prices.

*Mark Price: The Mark Price is made up of the global spot price index and funding basis rate, in other words, a real-time spot price on major cryptocurrency exchanges. 

$$ \small\textsf{Mark Price} = {\textsf{Index Price}\times \textsf{1+Funding Basis}} $$

*Funding Basis: Variable representing the precedence of the futures market over the movement of the spot market. Thus, the difference between the spot and the futures price

$$ \small\textsf{Funding Basis} = {\textsf{Current Funding Rate}} \times {\textsf{Time until Funding} \over \textsf{Funding Interval}} $$

※Note: In a highly fluctuating market, the Last Traded Price on MCS may temporarily deviate from the Mark Price. Traders must ensure to pay attention to the Liquidation Price and the Mark Price interval to prevent unnecessary liquidations.

In addition, MCS provides systematic features to prevent liquidations.

Adjusting Margin and Leverage

Traders can minimize their risk by adjusting their position's leverage and margin. As shown below, margin can be added to the position from the 'Position Tab' to widen the gap between the liquidation price and mark price.

 To add or remove margin, click the pencil icon. Enter the amount of margin to add and click confirm. In order to remove margin, click the remove tab and follow the same procedure.

Stop-Loss Order

Stop-loss orders are automatic trade orders given by the trader to trigger a close when a certain price(loss) level is reached to minimize losses. Traders can set a simple close position strategy at the point of position entry. If the trader desires to close the position partially or with a limit order, the conditional order can be used to place a stop loss limit order. The stop-loss order price is set against the market price (last/mark/index).