What is estimated liquidation price?
- For each open position, we report an estimated liquidation price.
- It is important to emphasize that this price is just an estimate.
- Unlike on other platforms that use isolated margin, margin on ACDX is used for all open positions, and unrealized profits or losses in all contracts count towards the margin available (sometimes called "cross margin").
- This means that whether a user goes into liquidation is determined by the performance of all their positions, so a liquidation price for any given contract can only be an estimate.
How to calculate the estimated liquidation price?
- The estimate is calculated by first assuming that contracts with the same underlying collateral token (e.g. BTC-PERP and BTC-Z20) will have price moves that are correlated with that underlying token, and that otherwise price moves will be independent of each other.
- We then calculate what price move (for this set of correlated assets) would cause the user to go into liquidation, and add that move to the mark price. This gives the liquidation price estimate.
- The estimated liquidation price is updated whenever one of its inputs changes, so it stays up-to-date.