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What Are Isolated Margin Trading Positions

2021-09-15 06:38

What are Isolated Margin Trading Positions?

Isolated Margin Trading Positions are used to calculate the cost and profit/loss of a position in historical transactions. The isolated margin position is not dependent on the amount of funds in your account or your borrowing behavior. Instead, it uses cumulative data from historical trades of the trading pair (long and short) to calculate. The position information is recalculated and updated every 5 minutes. For example, if you make a margin trade within the 5 minutes before the system recalculates, the position value and profit/loss calculations will be based on the prevailing calculations.

Why is Isolated Margin Trading Positions calculation useful in trading?

If you open a long/short margin position over a series of transactions, the Isolated Margin trading positions calculation can be used to calculate the average cost of your trades. It is convenient for checking your profit and loss and position value based on your historical trading activity, so you can make better investment decisions.

Frequently Asked Questions

1. How to calculate isolated margin trading positions/cumulative margin positions?
Trading position refers to the net buy (long) / net sell (short) amount of an asset you traded in a particular isolated trading pair since you opened the initial position. For example, if you opened a margin position over a series of transactions, you can use the cumulative calculation to help determine your net position size.
Suppose you opened a BTCUSDT isolated margin position and made a series of transactions following your initial position. The net purchase quantity after each transaction is as follows:
DateTradeQuantityCumulative Net Buy (Trading Position)Direction
T+1Buy10 BTC10 BTCLong
T+2Sell7 BTC3 (= 10 - 7) BTCLong
T+3Sell2 BTC1 (= 3 - 2) BTCLong
T+4Sell5 BTC-4 (= 1 - 5) BTCShort
T+5Buy4 BTC0 (= -4 + 4) BTCNull
At T+3, you will have a long position of 1 BTC.
At T+4, you will have a short position of 4 BTC
At T+5, you will have no position.
*Assuming on T+3, you have a long position of 1 BTC and hold 1 BTC in your margin account, you then transferred the 1 BTC to your spot account, i.e. no BTC of assets in your isolated margin account, your trading position will still have a long position of 1 BTC.
2. How to calculate the cost price in isolated margin positions?
For long positions:
Cost Price = ∑ (Buy Quantity * Buy Price) / Position Size (since the initial position was opened)
In this case, any additional long positions following the initial position will be accounted for and recalculated to determine the new cost price.
For short positions:
Cost Price= ∑ (Sell Quantity * Sell Price)/ Position Size (since the initial position was opened)
In this case, any additional short positions following the initial position will be accounted for and recalculated to determine the new cost price.
A weighted average takes into account the quantity and price purchased with each trade. In other words, if you buy an additional 2 BTC, the price you pay will affect the average more than if you bought 1 BTC. When a position returns to zero or changes direction, the cost price will be recalculated.
To help you understand better, please refer to the following example:
DateTradeQuantityExecution PriceTrading PositionCost Price
T+1Buy1 BTC38,000 USDTLong 1 BTC38,000 USDT
T+2Buy2 BTC40,000 USDTLong 3 BTC
1*38,000+ 2*40,000)/(1+2)=39,333.333333 USDT
(The cost price has been recalculated as you accumulate more of the same position.)
T+3Sell1 BTC39,000 USDTLong 2 BTC
39,333.3333 USDT
(No additional trades occurred in the same direction. Therefore, the position and the cost price remained unchanged.)
T+4Sell3 BTC45,000 USDTShort 1 BTC
45,000 USDT
(Sold the remaining 2 BTC at 45,000 USDT, and initiated a short of 1BTC at the same price.)
3. What is Floating PNL?
Floating profit and loss is the unrealized profit and loss of a position calculated based on the index price and the cost price. The formula for floating profit is as such:
Long position floating PNL = Position Size × (Index Price - Cost Price);
Short position floating PNL = Position Size × (Cost price - Index price).
For example:
Long trade:
Suppose you hold a long 3 BTC position in the BTCUSDT isolated pair, and the cost price is 40,000; the index price of BTCUSDT is 50,000. Your floating profit and loss will be = 3*(50,000 - 40,000) = 30,000 USDT.
Short trade:
If you hold a short 3 BTC position while the cost price and index price remain unchanged, your floating PNL will be = 3*(40,000 - 50,000) = -30,000 USDT
4. What is Total PNL?
Total PNL refers to the total profit and loss of your positions.
Total PNL is calculated as = Net Buy Quantity (of all previous trades)*Index Price - Net Buy Market Value
*Net Buy Quantity = Quantity of Buy order position - Quantity of Sell positions (trade asset)
Net Buy Market Value = Amount of buy orders traded - the number of sell orders traded (quote asset)
*Note: The PNL calculation in Margin Order History also uses the total PNL calculation, you can go to Margin Order History and select a specific time period for the PNL calculation.
For example, here are the trade details of a BTCUSDT isolated pair:
DateTradeQuantityExecution Price
T+1Buy10 BTC30,000 USDT
T+2Sell7 BTC32,000 USDT
T+3Sell2 BTC33,000 USDT
Assume the latest index price of BTCUSDT is 36,000.
Net Buy Quantity = 10 - 7 + 2 = 5 BTC
Net Buy Market Value = 10*30,000 + 2*33,000 - 7*32,000 = 142,000
Total profit/loss = 5*36,000 - 142,000 = 38,000 USDT
5. What is Realized PNL?
Realized PNL refers to profit or loss of your completed trades. It can be calculated by this formula:
Realized PNL = Total PNL - Floating PNL
Let’s refer to the above table. Suppose the latest index price of BTCUSDT is 36,000.
Your position size on T+3 will be 5 BTC
The cost price of each BTC is 10*30,000 + 2*33,000) /12 = 30,500 USDT.
Your realized profit and loss is 38,000 - (5*(36,000 - 30,500)) = 10,500 USDT.