When setting the Take profit & Stop loss, you can choose different prices for the trigger orders. Both the ‘Last Price’ and ‘Mark Price’ can be utilized as the trigger price. However, they will bring different outcomes.
Now let’s have a look at their differences, scenarios, and settings.
1. What Are the Last Price and Mark Price?
The Last price is the latest transaction price of the contract. In the traditional Futures market, the last price is used to mark positions. However, price manipulation and lack of liquidity can cause abnormal price fluctuations.
To avoid the risks, KuCoin Futures has introduced the Mark Price, using a reasonable price instead of the latest transaction price to mark the contract. The mark price is calculated based on the spot index price and the funding rate, only influencing the liquidation price and unrealized PnL.
Take KuCoin Futures website as an example:
2. Scenarios, Pros and Cons
1) Using the ‘Last Price’ for trigger price
- Pros: When setting the ‘Last Price’ for the trigger of your Take Profit & Stop Loss order, the execution price will be much closer to your expected transaction price.
- Cons: As the liquidation is triggered according to the ‘Mark Price’ rather than the ‘Last Price’, sometimes when the ‘Mark Price’ reaches the liquidation line, the ‘Last Price’ is still away from the stop loss price, especially when the stop loss price is close to the liquidation price.
Being afraid of the price drop, user A set the stop loss at the ‘Last Price’ to trigger the order at $47,000. The price then fluctuates sharply and the ‘Mark Price’ reaches the liquidation line. However, the stop loss is still not triggered because the ‘Last Price’ is still away from the stop loss one. Thus, the position is liquidated before the stop loss takes place.
2) Using ‘Mark Price’ for trigger price
- Pros: Setting ‘Mark Price’ can ensure the stop loss to be triggered before the liquidation occurs.
- Cons: As the transaction is executed at the ‘Last Price’, when the order is set with the ‘Mark Price’ for the trigger, the actual execution price of the stop loss order might deviate from your intended one due to the price difference between the ‘Mark Price’ and the ‘Last Price’. To avoid this situation, it is recommended to set stop limit order to take profit or stop loss.
3) Applicable scenarios
As you can see, there are pros and cons for both the ‘Last Price’ and ‘Mark Price’, please choose the type of trigger price according to your needs.
A. If you want the trigger price to be closer to your intended transaction price, you can choose the ‘Last Price’ for your ‘Take Profit’ order so that the order can therefore be filled in a quicker way.
B. It is not suggested to set the ‘Stop Loss’ price close to the liquidation one. To reduce the risks of being liquidated, you can choose ‘Mark Price’ as the trigger one.
C. It is recommended to set Take profit & Stop loss when placing the order, which is more convenient and can lower the risks caused by price swings.
3. How to Set Last Price and Mark Price in Take Profit & Stop Loss?
Whether on app or website, you can set the type of trigger price when placing order or holding the position.