H1 What is Auto-margin?
Auto-margin is a toggle in AAX Futures trading that automatically adds margin to your position to avoid liquidation.
If enabled, the system will automatically pull funds from your futures account balance when your position reaches the liquidation price. This brings your position back to the initial margin rate.
If the available balance in your futures account is insufficient, the system will first cancel your open order to make funds available. Then, the system will use the available funds and fill your margin position near the mark price.
The auto-margin feature is turned off by default. Users can turn on the “Auto Margin” mode under the "Position" section.
H2 What is the formula for auto-margin?
When the account balance is sufficient, the amount automatically added each time is called the initial margin of the position：
USDT settled contract initial margin = (open position amount*open price) * contract size (1/leverage + maker fees rate)
BTC settled contract initial margin = (open position amount/open price) * (1/leverage + maker fees rate)
Calculation for auto-margin:
The first additional amount = Initial position margin amount
The second additional amount = Initial position margin amount * 2
The third additional amount = Initial position margin amount * 4
The nth additional amount = Initial position margin amount * 2^ (N-1)
When the account balance is insufficient, the amount automatically added each time may be added to the position margin or failed to add according to the account amount.
When the system calculates that it will still trigger the liquidation after adding the margin amount, in order to definitely reduce the user's asset loss, auto-margin addition will be waived.
After the auto-margin addition, the new liquidation price calculation formula is:
Long position liquidation price = [Average position price *(1+ Maintenance margin rate) - (Position margin + Automatically-covered margin) / |position|*contract size] / (1-maker fees rate)
Short Position Liquidation Price = [Average position price *(1- Maintenance Margin Rate) + (Position margin + Automatically-covered margin) / |position|*contract size] / (1+maker fees rate)
H3 Sample situation on how auto-margin feature works
User A opens 5,000 contract for BTCUSDTFP perpetual contract at the price of 18,000 USDT with 10x leverage.
The estimated liquidation price is 16,288.98 USDT and the available balance in his contract account is 1,000 USDT.
When placing the order, the user switches on “Auto-margin”.
If the mark price drops to 16,288.98 USDT, i.e. reaching the liquidation price, the system executes auto-margin to avoid liquidation.
Based on the formula discussed earlier, the added margin amount shall be 764.56 USDT. After the margin addition, the liquidation price will be lowered to 14,758.93 USDT to avoid the liquidation of the user's position.
If the fair price continues to fall to 14,758.93 USDT, the auto-margin feature will be re-enabled. By that time, the available balance of the user is only 235.44 USDT. If the margin addition amount is less than the calculated amount, it will be added normally. If not, all the remaining balance of 235.44 USDT will be added as margin and the liquidation price will be calculated accordingly.
H4 Important notes:
When liquidation is triggered, the system will first cancel all unfulfilled active orders in the account to free up funds and use this to avoid liquidation.
When the auto-margin addition feature is enabled, the lowest leverage the position will go is limited to 1x. More margin will not be added when a position is already at 1x leverage, even if there is excess available margin.
The margin cannot be automatically added when the users trade with the contract bonus.
Once the auto-margin addition feature is enabled, your futures account balance will be used in fulfilling the auto-margin every time your position is close to the liquidation price. The balance of spot, fiat, and savings accounts will not be affected.
Once the auto-margin addition feature is enabled, if you set a stop loss, you may stop the loss and close the position after the margin addition. In order to avoid unnecessary losses, please exercise caution.