Kana Labs
  • Getting Started
    • Welcome to Kana Labs
  • CROSS CHAIN SWAPS
    • AMM DEX Aggregator
  • INTEGRATE KANA WIDGET
    • Kana Widget
      • Install Widget
      • Configure Widget
      • Configure Aptos Keyless
  • Web3 Aggregator SDK
    • Web3 Aggregator SDK
      • Installation
      • SameChain
      • Cross Chain Swap
      • Aggregator API's
  • SPOT TRADING PLATFORM
    • Kana Trade
      • API Docs
  • PERPETUAL FUTURES
    • Kana Perps
      • Getting Started
        • Mint Tokens on Testnet
        • Mainnet Tutorials
          • Getting Started
          • Connecting Wallet & Enabling “One Click Transaction”
          • Deposit & Withdraw Tokens
          • Placing a Market Trade Order
          • Placing a Limit Trade Order
          • Partially & Fully Closing a Live Trade Order
          • Adding Margin to an Open Position
          • Defining Take Profit & Stop Loss
      • Breaking Down Kana Perps
        • Assets Supported
        • Order Types
        • Orderbook
        • 1-Click Trading in Kana Perps
          • Delegation
        • Funding Rate
        • Leverage
        • Margin and Liquidation
        • Hedge Mode
          • Hedging a Short-Term 2-3% Price Decline
          • Dual Positioning for Flexible Profit-Taking
        • Trading Fees
      • Technical Architecture
      • API Docs
        • Installation Setup
        • Kana Perps Typescript REST API
        • Kana Perps Python Websocket API
        • Kana Perps Python REST API
        • Steps to place an order
        • Perps Contract Error Codes
        • Websocket Connection
        • Supported Markets
  • SPOT & PERP APIs
    • Trading APIs
      • Kana Trade API
      • Kana Perps API
        • Installation Setup
        • Example setup functions
        • Kana Perps Typescript REST API
        • Kana Perps Websocket API
        • Kana Perps Python Websocket API
        • Kana Perps Python REST API
        • Steps to place an order
  • PAYMASTER SERVICE
    • Kana Paymaster For Aptos and Supra
      • How it works?
      • How to Register?
      • Deposit Allowance
      • Manage Users
      • Paymaster SDK Tutorial (Typescript)
      • Paymaster API
      • Module & Function Whitelist
      • Subscription - Coming soon
      • FAQS
  • PERPETUAL OPTIONS
    • OPerps
  • Tokenomics & Governance
    • Kana Labs Tokenomics
  • REWARDS & REFERRAL PROGRAM
    • Rewards Program
      • Reward Program Season 1
      • Reward Program Season 2
      • How to Keep Track of Your Points?
      • Where to find the Missions Dashboard?
  • Referral Program
    • How to Generate Referral Link? (For the Referrer)
    • How to map your wallet to the invite IDs? (For the invited users)
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On this page
  • Isolated Margin Method
  • Margin Management & Liquidation
  • Liquidation Trigger
  1. PERPETUAL FUTURES
  2. Kana Perps
  3. Breaking Down Kana Perps

Margin and Liquidation

Isolated Margin Method

The Kana Perps Platform uses the Isolated Margin method, requiring traders to maintain sufficient margin to open and manage their positions effectively. Under this system, traders need an initial margin amount to open a trade order and a maintenance margin amount to keep the order active/open in the orderbook.

The initial margin requirement is calculated using the below formula:

Margin= (Position Size X Mark Price) / Leverage

(in simpler words, Margin equals order value divided by leverage)

Position Size: The quantity of the asset being traded (e.g., 35.71 APT for a $250 trade order at $7 per APT).

Mark Price: A fair value price derived from market-wide data to calculate margin and prevent manipulation.


Example:

With a current asset trading price of $7 per APT and an order value of $250 USDT, the initial maintenance margin required to open a trade order would be -

If we take 10x leverage:

  • Margin Used: 35.71 X 7 / 10 = 25 USDT

For 20x leverage:

  • Margin Used: 35.71 x 20 / 20 = 12.5 USDT


Margin Management & Liquidation

Traders must maintain a maintenance margin whenever they have active trades, which is a smaller proportion of the initial margin, to keep positions active. A margin call will be issued if the collateral falls below this threshold due to price fluctuations, which will liquidate your trade order.

The liquidation threshold, also known as the maintenance margin, is the minimum margin requirement that traders must maintain to keep their positions open. If the account balance falls below this threshold due to adverse price movements, the position will be automatically liquidated to prevent further losses.

Maintenance Margin Calculation:

Our maintenance margin is set at 2.5% of the position’s notional value.

Using the previous example:

Based on the metrics in the initial maintenance margin example, we have

  • Notional Value: 35.71 × 7 = 250 USDT

  • Maintenance Margin: 250 × 0.025 = 6.25 USDT


Liquidation Trigger

Liquidation occurs when the account balance (initial margin + unrealised PnL) drops below the maintenance margin requirement. The key factors affecting liquidation include:

  • Mark Price Movement – If the mark price moves unfavourably, unrealised losses will increase, reducing the trader's margin balance.

  • Leverage Impact: Higher leverage reduces the initial margin required but increases liquidation risk, as small price movements can quickly deplete the margin.

Preventing Liquidation:

To avoid liquidation, traders should:

  • Regularly monitor their margin balance and unrealised PnL.

  • Add more collateral before the margin balance drops below the maintenance requirement.

  • Use lower leverage to reduce liquidation risk.

  • Set stop-loss orders to manage risk proactively.

Actively managing margin levels and monitoring price fluctuations can help traders avoid liquidation and control their positions. Adding collateral when necessary is also recommended to prevent forced liquidation.


Example of Liquidation Trigger:

At 10x leverage, liquidation occurs when the unrealised loss exceeds $18.75 (since 25 - 6.25 = 18.75).

At 20x leverage, liquidation occurs when the unrealised loss exceeds $6.25 (12.5 - 6.25 = 6.25).

Liquidation Price Calculation for 10x Leverage:

  • Entry Price = $7

  • Liquidation Price Formula:

Liquidation Price = Entry Price − (Initial Margin - Maintenance Margin) / Position Size

Liquidation Price = 7 − (25 − 6.25) / 35.71 = 6.48

If the price of APT-PERP drops to $6.48, the position is liquidated.

For 20x leverage, the liquidation price is much closer to $6.82, meaning the position gets liquidated faster.

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Last updated 3 months ago