KuCoin Futures Paper Trading Guide: Position Risk

Position risk is an important feature included in the KuCoin Futures upgrade, which is currently supported in the Futures paper trading environment. It is used to identify the liquidation risk of a position:

• When the risk ratio is low, the risk of the position is relatively low.
• On the contrary, the higher the risk ratio, the closer the position is to being liquidated. When the risk ratio reaches 100%, the position liquidation will be triggered.

The position risk is calculated in real-time. It can be used as a barometer for the risk of a position, thereby helping us evaluate and manage the risk of a position. In this guide, we will discuss specific methods for looking at position risk as well as various factors to note while doing so.

1. How is position risk calculated?

Risk ratio = maintenance margin/position margin * 100%.

Maintenance margin refers to the minimum amount of margin required for maintaining a position.

In other words, position risk is calculated as the ratio of the position maintenance margin to the amount of margin. It can also be viewed as a margin ratio. If the risk ratio reaches 100%, it means that the position margin has fallen below the maintenance margin, triggering the liquidation of the position.

2. Where can we view the position risk?

Go to Positions > Risk. As shown in the screenshot:

3. How to control the risk of a position through Risk?

We can use Risk to effectively monitor the risk of a position and prevent liquidation. KuCoin Futures recommends that beginners engage in Futures trading based on the following risk levels：

• Low risk: 1% < Risk < 20%
• Medium risk: 20% =< Risk < 50%
• High risk: 50% =< Risk

In addition, the following three actions can be used to reduce risk:

• Increase position margin. This can optimize the liquidation price and prevent the mark price from hitting the liquidation price.
• Set take profit and stop loss. This can control position risks and avoid more losses.
• If the risk ratio reaches medium or high risk levels, consider reducing or closing the position if appropriate. Reduce margin losses.

For more details, please check out How to Manage Position Risk in KuCoin Futures?

4. Other things to note:

1. To avoid liquidation (when the risk ratio reaches 100%), we recommend always maintaining a risk ratio of less than 50%.

2. A risk ratio exists even when a position is profitable, and it can be obtained using the methods described above.

3. Keep track of the maintenance margin rate and initial margin rate corresponding to each contract: log in and click here for more details.

4. To protect user interests and reduce the possibility of large positions being liquidated, KuCoin Futures implements a risk limit level,which affects liquidations. That is:

• If a user’s risk limit level >1, when the risk ratio reaches 100%, the user’s position will be partially reduced in order to reduce the user’s risk limit level;
• If a user’s risk limit level is 1, when the risk ratio reaches 100%, liquidation will occur.