FAQ About Futures Contract

Why does the inverse contract use USD as quote currency instead of USDT?

By using USD as the quote currency in inverse contracts, there is no need to maintain an additional quote currency. Traders can conduct transactions and settle them with only one currency, and at the same time avoid any potential impact from the price volatility of USDT.


How to buy long and sell short?

Take buy long for example, if you predict the price will rise, you can buy contracts to go long. When the market price actually goes up, you will profit, otherwise, you will lose. The reverse is true for selling short.

Note: Traders can only hold ONE position in the same market. It is not possible to buy long and sell short at the same time. 


Why do futures contracts amplify profits and losses compared to spot trading?

The biggest difference between futures contracts and spot trading lies in the trading mechanism. Futures contracts adopt a two-way trading mechanism with leveraged margin, which allows traders to use part of their account balance as margin and achieve a trading volume that exceeds their own funds through leverage.

For example, each BTC contract on CoinEx is worth 1 USD, and trader A intends to buy BTC with a total value of 10,000 USD, i.e. 10,000 BTC contacts. Without leverage, trader A needs to invest 10,000 USD to complete the purchase.

However, if the margin rate is 10%, trader A only needs 1,000 USD for the purchase. That is, the 1,000 USD investment is amplified 10 times. Similarly, if a 1% margin is applied, trader A only needs 100 USD, which is amplified 100 times.


How to close an open position?

There are two ways to close a position:

1. Select [Liquidate] or [Close] in the position area.

2. Submit an order in the opposite direction, and the system will consider it an operation to close the position.

Note: If the order amount exceeds the current position quantity, a new position in the opposite direction to the original one will be opened with the excess amount.


What causes the difference between unrealized PNL and actual PNL?

To prevent malicious market manipulation, CoinEx uses Mark Price to calculate unrealized PNL, while the actual PNL is determined by the exit price.

Therefore, when the transaction price differs from the Mark Price, there will be a certain discrepancy between unrealized PNL and actual PNL.


What is Mark Price? What does it do?

1. Mark price is used to determine whether forced liquidation is triggered. It is calculated based on the Index Price and a gradually decreasing funding fee basis.

2. CoinEx employs a unique system called Fair Price Marking, where instead of the Last Price, the Mark Price is set as the Fair Price to avoid unnecessary liquidations. Without this system, when the market is being manipulated or experiencing low liquidity, the Mark Price may deviate from the Index Price, causing unnecessary liquidations.

Note: Mark Price only affects the Liquidation Price and Unrealized PNL, and does not affect Realized PNL.


Why is my position forcefully liquidated?

1. To keep a position open, traders must hold a certain percentage of the position's value as margin, i.e. maintenance margin. If your position margin falls below the maintenance margin, the position will be forcefully liquidated.

2. CoinEx uses Fair Price Marking in futures to avoid unnecessary liquidations caused by market manipulation or insufficient liquidity. That is, forced liquidation occurs only when the Fair Price (or Mark Price) is lower (Longs) or higher (Shorts) than the Liquidation Price.

3. Once forced liquidation is triggered, your position will be taken over by the liquidation system at the bankruptcy price and closed in the market. In this case, all pending orders with the same margin coin will be canceled automatically, including TP/SL orders, limit orders, stop-limit orders, and stop-market orders.


What is Insurance Fund? What does it do?

1. After forced liquidation is triggered, CoinEx will use a Dutch auction strategy to match orders in the market, and the resulting profits will be added to Futures Insurance Fund.

Dutch auction strategy involves the auctioneer starting at a high price and then gradually lowering the price until a buyer accepts the price or a predetermined reserve price is reached. The first bidder to accept the price wins and pays the price called for.

2. CoinEx uses Futures Insurance Fund to prevent Auto-Deleveraging. When forced liquidation occurs, the Dutch auction strategy will be applied to match orders in the market, and any losses incurred will be covered by the Insurance Fund.


Why is my position Auto-deleveraged?

1. When forced liquidation is triggered, the trader's position will be taken over by the CoinEx liquidation system. If the position is closed at a price lower than the bankruptcy price, the system will use the insurance fund to make up for any losses caused by forced liquidation.

2. If the insurance fund is insufficient or the liquidation order is not fully executed due to low liquidity, Auto-Deleveraging, or ADL, will be activated.

3. Once ADL is activated, the system will reduce the counterparty's position by profit and leverage based on the Mark Price at the time of trigger. For more details, please refer to Futures Auto-Deleveraging (ADL).


Why do I need to pay Funding Fees?

1. CoinEx has introduced a Funding Fee system to keep the Futures market price close to the Spot market price, thus preventing divergence in the price of both markets. 

2. The funding rate is updated every minute, while funding fees are settled every 8 hours. Traders will only pay or receive funding fees if they hold a position at the time of settlement. 

3. When the funding rate is positive, long traders will pay the funding fee to short traders. Likewise, when the funding rate is negative, short traders will pay the funding fee to long traders. 

Note: Funding fees are paid peer-to-peer between the long and short traders, and CoinEx does not charge any additional fees for this process.