About Mark Price
Mark price is an "intelligent reference price" used in futures trading. It dynamically calculates a reasonable trading price by analyzing the index price and recent market trends.
Instead of relying solely on the latest price, CoinEx uses a unique mechanism called Fair Price Marking that takes into account the market depth, long-term data, and price information from multiple major exchanges.
This mechanism effectively reduces risks caused by short-term volatility, market manipulation, or lack of liquidity, lowering the chances of users being wrongly liquidated.
How is Mark Price Calculated?
Mark price is not the same as the real-time market price. Instead, it is determined by 2 key factors:
1. Index Price: The average price derived from multiple major exchanges, reflecting the overall market trend.
2. Moving Average Premium Index: It measures the recent deviation between buy and sell orders to smooth out unexpected price fluctuations.
3. Mark Price calculation:
Mark Price = Index Price × (1 + Moving Average Premium Index)
Moving Average Premium Index = MA{[ Max(0, Depth-Weighted Bid Price - Index Price) - Max(0, Index Price - Depth-Weighted Ask Price) ] / Index Price}
MA refers to the moving average of the premium index per minute from N hours ago to the current time point, N = the current funding fee collection interval (e.g., 8 hours).
4. Notes:
(1) Mark price is updated every 5 seconds to reflect market changes in real-time.
(2) Mark price only affects liquidation price and unrealized PNL, but does not affect realized PNL.
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:
1. Calculating Unrealized PNL: Mark price dynamically reflects the unrealized PNL of open positions, helping monitor risk.
2. 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.
3. 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.
4. 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.
🔗 Learn More: What is Forced Liquidation >>
Tips for Using Mark Price
In futures trading, using the mark price as a key indicator to assess position risk is essential. Investors should develop the habit of regularly checking the mark price to stay updated on their positions, especially during periods of heightened market volatility. Setting appropriate price alerts and maintaining a sufficient margin buffer can help you manage trading risks more effectively.
Moreover, the difference between the mark price and the real-time execution price is normal in this protective mechanism. By referencing more market data, the mark price provides a more accurate reflection of an asset's actual value, helping investors avoid the impact of abnormal market fluctuations. Therefore, it is recommended to utilize the mark price as a core tool for risk management to determine entry points, select a leverage level, and adjust trading strategies in a timely manner.
With the mark price, investors can secure a stable and reliable futures trading experience.