Margin Trading

Specification: LP-9001 DEX Trading Engine

Full Documentation: DeFi Margin Trading

Margin trading allows you to trade with borrowed funds, amplifying both potential gains and losses.

Overview

Feature	Value
Max Leverage	50x (asset-dependent)
Margin Modes	Cross and Isolated
Collateral	USDT, USDC, BTC, ETH, LUX
Liquidation	Automatic at maintenance margin
Funding	8-hour intervals

Leverage by Asset

Asset	Max Leverage	Initial Margin	Maintenance
BTC	50x	2%	0.5%
ETH	50x	2%	0.5%
LUX	30x	3.33%	1%
Major Alts	30x	3.33%	1%
Minor Alts	20x	5%	2%

Quick Start

Open a Long Position

import { DEX } from '@luxfi/trading'

const dex = await DEX({ rpcUrl: 'https://api.lux.network/rpc' })

// Open 10x long BTC position
const position = await dex.margin.openPosition({
  symbol: 'BTC-USD',
  side: 'long',
  collateral: '1000',    // $1,000 USDT
  leverage: 10,          // 10x = $10,000 position
  type: 'market'
})

console.log(`Position Size: $${position.size}`)
console.log(`Entry Price: $${position.entryPrice}`)
console.log(`Liquidation Price: $${position.liquidationPrice}`)

Open a Short Position

// Short ETH with limit order
const position = await dex.margin.openPosition({
  symbol: 'ETH-USD',
  side: 'short',
  collateral: '2000',
  leverage: 5,
  type: 'limit',
  price: '2500.00'
})

Set Stop Loss and Take Profit

const position = await dex.margin.openPosition({
  symbol: 'BTC-USD',
  side: 'long',
  collateral: '1000',
  leverage: 10,
  type: 'market',
  stopLoss: '45000',     // Exit if price drops to $45k
  takeProfit: '55000'    // Exit if price reaches $55k
})

Margin Modes

Isolated Margin

Each position has its own collateral pool. Liquidation of one position does not affect others.

// Enable isolated margin
await dex.margin.setMode('isolated')

const pos1 = await dex.margin.openPosition({
  symbol: 'BTC-USD',
  collateral: '1000',
  leverage: 10,
  marginMode: 'isolated'
})

// If pos1 is liquidated, only its $1,000 is lost

Cross Margin

All positions share a single collateral pool. Profits from one position can prevent liquidation of another.

// Enable cross margin
await dex.margin.setMode('cross')

// Deposit to cross margin pool
await dex.margin.deposit({
  asset: 'USDT',
  amount: '10000'
})

// Positions share the $10,000 pool
const pos1 = await dex.margin.openPosition({
  symbol: 'BTC-USD',
  size: '50000',
  marginMode: 'cross'
})

Managing Positions

Add Collateral

// Reduce leverage by adding collateral
await dex.margin.addCollateral({
  positionId: 'pos_123',
  amount: '500'
})

Partial Close

// Close 50% of position
await dex.margin.closePosition({
  positionId: 'pos_123',
  percentage: 50
})

Full Close

// Close entire position at market
await dex.margin.closePosition({
  positionId: 'pos_123',
  type: 'market'
})

Liquidation

Liquidation Price Calculation

Long Position:
Liq Price = Entry × (1 - (Collateral / Size) + Fees)

Short Position:
Liq Price = Entry × (1 + (Collateral / Size) - Fees)

Monitor Health

const position = await dex.margin.getPosition('pos_123')

console.log(`Margin Ratio: ${position.marginRatio}%`)
console.log(`Health Factor: ${position.healthFactor}`)
console.log(`Distance to Liquidation: ${position.distanceToLiq}%`)

if (position.healthFactor < 1.5) {
  console.log('Warning: Position at risk of liquidation')
}

Funding Rates

Perpetual positions pay/receive funding every 8 hours:

// Get current funding rate
const funding = await dex.getFundingRate('BTC-USD')

console.log(`Current Rate: ${funding.rate}%`)
console.log(`Next Settlement: ${funding.nextTime}`)

// Positive rate: longs pay shorts
// Negative rate: shorts pay longs

Fees

Fee Type	Rate
Open Position	0.10%
Close Position	0.10%
Liquidation	5% of remaining collateral
Funding	Variable (typically 0.01% / 8h)

Risk Management

Leverage amplifies risk. A 50x position loses 50% of collateral with just a 1% adverse price move.

Best Practices

Start with low leverage - 2-5x while learning
Always use stop losses - Define max loss before entry
Monitor funding rates - Can compound significantly
Keep margin buffer - Don't use 100% of available margin
Understand liquidation - Know your liquidation price

Position Sizing

Recommended Position Size = Account Balance × Risk Per Trade / Stop Distance

Example:
- Account: $10,000
- Risk: 2% ($200)
- Stop Distance: 5%
- Position Size: $200 / 5% = $4,000
- Leverage: 4,000 / 10,000 = 0.4x (very conservative)

API Reference

For complete margin trading API documentation, see DeFi Margin Trading which includes:

Position lifecycle management
Solidity contract interfaces
Liquidation bot implementation
Cross-margin pool mechanics
Event subscriptions
Gas cost estimates

DeFi Margin (Full Guide) - Complete margin trading documentation
Perpetuals - Perpetual futures trading
Order Types - All supported order types
Fees - Complete fee schedule
Limits - Position and leverage limits

Margin Trading

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