What Is Mark Price?
In order to improve the stability of the contract market and reduce unnecessary forced closing when the market is abnormally volatile, we use the mark price to calculate the user's unrealized profit and loss and trigger a forced reduction.
How is Mark Price Calculated
Mark Price= Median number (latest price, reasonable price, moving average price)
Meaning the following:
Latest Price= The Exchange's Median Price (Buy 1, Sell 1, Trade Price)
Reasonable price = index price * (1 + capital rate of the previous period * (time between now and the next charge of funds / the interval between the collection of funds rate)
Moving Average Price= Index Price + 5-Minute Moving Average (Spread)
Spreads(n)= The exchange's median price(n) - index price(n)
The mark price takes into account both the spot index price and the moving average of the base deviation. The moving average mechanism smoothly filters contract price fluctuations over a short period, reducing unnecessary forced closings due to abnormal fluctuations.
Key Features of Mark Price
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Calculation Basis: Mark Price is derived from a combination of the Index Price and funding rates, reflecting the true market value.
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Purpose: It minimizes the risk of unfair liquidations by reducing the impact of sudden price fluctuations in the market.
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Impact on Trading: Liquidation of futures positions is triggered based on the Mark Price, not the Last Traded Price, which can be influenced by temporary volatility or manipulation.
Example: Suppose the current Index Price of BTC is $90,000, but due to a temporary spike caused by a large order, the Last Traded Price rises to $95,000.
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The Mark Price, calculated using the Index Price and funding rates, may remain at $90,100, ensuring that traders are not liquidated unfairly due to the temporary spike.
Why is Mark Price Important?
The mark price mechanism is an essential feature of a mature trading platform’s risk management system and a key factor for investors when choosing a trading platform. Its main advantages include:
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Calculating Unrealized PNL: Mark price dynamically reflects the unrealized PNL of open positions, helping monitor risk.
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Preventing Market Manipulation: By analyzing depth-weighted buy and sell orders, the mark price helps signal abnormal trading activities. For example, a large trader tries to manipulate prices by placing buy orders with a bid price much higher than the market price. In that case, the mark price will factor in the market depth data (e.g., sell order volume), pricing out the deviations caused by manipulation.
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Following Industry Standards: The mark price mechanism is widely adopted by major institutions. CoinEx follows and optimizes these standards to reduce risks for users under extreme market conditions.
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Avoiding Unnecessary Liquidations: If the price of a cryptocurrency suddenly drops due to a temporary selloff, the real-time execution price may instantly fall below the user’s liquidation threshold. However, the mark price uses long-term data to determine whether this is a "fake alarm" and prevents unnecessary liquidation. This mechanism effectively reduces risks related to highly leveraged futures trading, price manipulation, and lack of liquidity.
How to Switch to Mark Price？
Open the futures trading page on VOOX. Hover your mouse over [Last Price ▼], [Index Price ▼], or [Fair Price ▼] above the K-line chart, and a dropdown menu with three price options will appear. Click to select the price you want to use to switch between them.
FAQs
1. Can the Mark Price and Last Price be different?
Yes, they can differ. The Mark Price is derived from the Index Price with adjustments for funding rates and premiums, while the Last Price is the most recent price at which the asset was traded on the futures market.
Yes, they can differ. The Mark Price is derived from the Index Price with adjustments for funding rates and premiums, while the Last Price is the most recent price at which the asset was traded on the futures market.
2. Why is my position liquidated when the Last Price hasn't hit the liquidation level?
Liquidations are triggered by the Mark Price, not the Last Price. The Mark Price ensures fair liquidation thresholds, preventing manipulations and volatility spikes from affecting your positions unfairly.
3. Does the Mark Price affect the execution of trades?
No, the Mark Price is only used for calculating unrealized PnL and triggering liquidations. Trade executions are based on the Last Price.
4. How often are the Mark Price updated?
Mark Price is updated frequently, typically every few seconds, to reflect real-time market conditions and ensure accuracy in pricing.
Risk Warning
Futures trading carries substantial risk, particularly during periods of high price volatility. Significant differences may occur between the mark price and the last fill price. Since unrealized PnL is calculated using the mark price, the displayed PnL may not match the actual PnL settled when the position is closed. The mark price is for reference only, and the final PnL is based on the actual fill price.
Traders are advised to closely monitor the mark price, last price, and index price to avoid liquidation due to market fluctuations.
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