Why is reasonable price adopted?
The platform adopts uniquely-designed reasonable price marking system to avoid unnecessary forced liquidation of high-leverage products. Without this system, marked price may deviate unnecessarily from price index due to manipulated market or lack of liquidity, thus leading to unnecessary forced liquidation. The system sets marked price as reasonable price instead of the latest trading price to avoid unnecessary forced liquidation.
The Mechanism of Reasonable Marked Price
For perpetual contract, its reasonable marked price is the index-based price with reference to the price of global spot market plus the funding cost basis that decreases over time.
All ADL contracts adopt reasonable price marking method to calculate unrealized profit/loss and forced liquidation price, which does not affect realized profit/loss. Only when reasonable price reaches the forced liquidation price of the trader will forced liquidation occur.
Note: this means that you may see positive or negative unrealized profit/loss immediately after your order is executed. The reason for such circumstance is slight deviation between reasonable price and trading price. Such phenomenon is normal and does not mean that you have lost money, but you must pay attention to your forced liquidation price to prevent yourself from being subjected to premature forced liquidation.
Calculation of Reasonable Price
The reasonable price of perpetual contract is calculated by using the basis rate of funding cost:
Basis rate of funding cost = funding cost rate * (next time for paying funding cost / time interval of funding cost)
Reasonable price = index-based price * (1 + basis rate of funding cost)
Query of Reasonable Price
The trading page of the contract displays the latest price on the current market instead of the reasonable price for calculating unrealized profit/loss and forced liquidation price.
If you want to enquire index-based price and reasonable price record of the contract, please enter and enquire on the index page of the contract.