Bitcoin Forum
October 18, 2017, 04:11:43 AM
 News: Latest stable version of Bitcoin Core: 0.15.0.1  [Torrent]. (New!)
 Home Help Search Donate Login Register
 Pages: [1] 2  All
 Author Topic: Bitcoinica "zhoutonging price" formulae (unofficial)  (Read 4040 times)
zhoutong
VIP
Hero Member

Offline

Activity: 490

 January 06, 2012, 08:16:05 AM

Even though I represent Bitcoinica on daily basis, I do not take any responsibility if this post in anyway affects your trading outcome.

This post serves as a guide to help you determine which price will trigger forced liquidation. This post assumes your maintenance margin requirement is 4% or 25:1, which is applicable for typical Bitcoinica users.

Some Background

Actual leverage = trade value / net value

net value = margin balance + unrealized P/L
trade value = base price * amount

The actual leverage of your account is dynamic. When you make a profit, the leverage is lower, and when you make a loss, the leverage is higher. However, you must meet the minimum requirement of margin, which determines that the highest leverage tolerated is 25:1 when you make a loss.

This means, at any time, your net value must be at least 4% of your trade value.

The FULL formula

If you are LONG,

"Zhoutonging price" = current bid - (margin balance + unrealized P/L - (base price * amount * 4%)) / amount

If you are SHORT,

"Zhoutonging price" = current ask + (margin balance + unrealized P/L - (base price * amount * 4%)) / amount

The SIMPLIFIED formula

You can get some figures from Bitcoinica UI directly. Then,

"Zhoutonging price" = current ask + (net value - maintenance) / amount

OR

"Zhoutonging price" = current bid - (net value - maintenance) / amount

EDIT:

This is important. If you have BTC balance, you must add that into your long position amount, or subtract it from your short position amount. At any point, your "zhoutonging price" should be constant regardless of market price if you don't trade.

Founder of NameTerrific (https://www.nameterrific.com/). Co-founder of CoinJar (https://coinjar.io/)

Donations for my future Bitcoin projects: 19Uk3tiD5XkBcmHyQYhJxp9QHoub7RosVb
The grue lurks in the darkest places of the earth. Its favorite diet is adventurers, but its insatiable appetite is tempered by its fear of light. No grue has ever been seen by the light of day, and few have survived its fearsome jaws to tell the tale.
Advertised sites are not endorsed by the Bitcoin Forum. They may be unsafe, untrustworthy, or illegal in your jurisdiction. Advertise here.
Crypt_Current
Hero Member

Offline

Activity: 686

Shame on everything; regret nothing.

 January 06, 2012, 08:24:35 AM

"Zhoutonging price" = current ask/bid +/- (net value - maintenance) / amount

Am I to understand this as current ask DIVIDED BY bid, or current ask OR bid?

10% off at CampBX for LIFE:  https://campbx.com/main.php?r=C9a5izBQ5vq  ----  Authorized BitVoucher MEGA reseller (& BTC donations appreciated):  https://bitvoucher.co/affl/1HkvK8o8WWDpCTSQGnek7DH9gT1LWeV5s3/
LTC:  LRL6vb6XBRrEEifB73DiEiYZ9vbRy99H41  NMC:  NGb2spdTGpWj8THCPyCainaXenwDhAW1ZT
zhoutong
VIP
Hero Member

Offline

Activity: 490

 January 06, 2012, 08:26:03 AM

"Zhoutonging price" = current ask/bid +/- (net value - maintenance) / amount

Am I to understand this as current ask DIVIDED BY bid, or current ask OR bid?

That was unclear. Edited. Thanks!

Founder of NameTerrific (https://www.nameterrific.com/). Co-founder of CoinJar (https://coinjar.io/)

Donations for my future Bitcoin projects: 19Uk3tiD5XkBcmHyQYhJxp9QHoub7RosVb
Mushoz
Hero Member

Offline

Activity: 686

 January 06, 2012, 08:31:56 AM

This post assumes your maintenance margin requirement is 4% or 25:1, which is applicable for typical Bitcoinica users.

Is it possible to get a different margin requirement?

3phase
Sr. Member

Offline

Activity: 313

Third score

 January 06, 2012, 08:34:58 AM

Thanks Zhou, at last it is clear to me. I've been trading on margin for about 5 years and I am used to calculating leverage, expected profit, stops and margin calls in my head, just by looking at the prices of what I'm trading.

Until this post, I could not for the life of me figure out what your calculations were. I still don't get the logic behind it, but at least it is clear.

Fiat no more.
Δοκιμάστε το http://multibit.org - Bitcoin client τώρα και στα Ελληνικά
Crypt_Current
Hero Member

Offline

Activity: 686

Shame on everything; regret nothing.

 January 06, 2012, 08:36:36 AM

Alright let's plug in some numbers and see if I have this correct:

5.5 * 90 * 0.04 = 19.8
margin + unrealized P/L = 174
174-19.8 = 154.2
154.2 / 90 = 1.7133333333333333
And so the price at which this position would be Zhoutonged would be current bid - 1.71 ?

10% off at CampBX for LIFE:  https://campbx.com/main.php?r=C9a5izBQ5vq  ----  Authorized BitVoucher MEGA reseller (& BTC donations appreciated):  https://bitvoucher.co/affl/1HkvK8o8WWDpCTSQGnek7DH9gT1LWeV5s3/
LTC:  LRL6vb6XBRrEEifB73DiEiYZ9vbRy99H41  NMC:  NGb2spdTGpWj8THCPyCainaXenwDhAW1ZT
Crypt_Current
Hero Member

Offline

Activity: 686

Shame on everything; regret nothing.

 January 06, 2012, 08:41:57 AM

Thanks Zhou, at last it is clear to me. I've been trading on margin for about 5 years and I am used to calculating leverage, expected profit, stops and margin calls in my head, just by looking at the prices of what I'm trading.

Until this post, I could not for the life of me figure out what your calculations were. I still don't get the logic behind it, but at least it is clear.

Yes I believe now I will be able to use Bitcoinica much more efficiently.

10% off at CampBX for LIFE:  https://campbx.com/main.php?r=C9a5izBQ5vq  ----  Authorized BitVoucher MEGA reseller (& BTC donations appreciated):  https://bitvoucher.co/affl/1HkvK8o8WWDpCTSQGnek7DH9gT1LWeV5s3/
LTC:  LRL6vb6XBRrEEifB73DiEiYZ9vbRy99H41  NMC:  NGb2spdTGpWj8THCPyCainaXenwDhAW1ZT
bitcoinBull
Legendary

Offline

Activity: 826

rippleFanatic

 January 06, 2012, 08:44:20 AM

From the user's perspective:
Mistake 1) will assume he has a typical "maintenance margin requirement" with no idea how close to typical it actually is
Mistake 2) will assume a constant margin balance, when actually that margin balance will decrease as the price of bitcoin decreases
Mistake 3) will calculate the "zhoutonging price" based on the current bid, which will of course change.  Checks back later when the bid is lower, and suddenly their "zhoutonging price" is different than what they calculated using "current bid".  Maybe even zhoutonged already.

Three strikes and you're out.

How about a formula for the "zhoutonging price" which uses variables instead of constants?

College of Bucking Bulls Knowledge
zhoutong
VIP
Hero Member

Offline

Activity: 490

 January 06, 2012, 08:45:20 AM

This post assumes your maintenance margin requirement is 4% or 25:1, which is applicable for typical Bitcoinica users.

Is it possible to get a different margin requirement?

Yes, it is. But only for very special accounts.

Normally we don't accept such requests.

Founder of NameTerrific (https://www.nameterrific.com/). Co-founder of CoinJar (https://coinjar.io/)

Donations for my future Bitcoin projects: 19Uk3tiD5XkBcmHyQYhJxp9QHoub7RosVb
Mageant
Legendary

Offline

Activity: 1123

 January 06, 2012, 08:47:12 AM

I think it is important to tell people if they only have BTC in their currency account, then some strange effects happen.

---
First going long:
Namely, that even if you are trading with a 1:1 leverage you will get force liquidated at around 50% loss (assuming you are all in), not at 96% as in the account settings.

This is because when the BTC price drops then in addition to your P/L dropping your margin balance is also dropping. They basically meet at the halfway point.

On the good side, when the BTC price rises your margin balance increases. This means you are always able to buy relative to your BTC level in your currency account. That way you can always buy the same number of BTC no matter how high the price is. Your profits will be double, once in the P/L at Bitcionica and once in the value of your BTC in the currency account.

So with only BTC in your currency account you already effectively have a 2:1 leverage (even at 1:1 account setting)!

So, correct me if I'm wrong on this, but this means in this case (100% BTC in account) you must effectively calculate an increased leverage of your account settings (double?).

---
Second going short:
Here it also strange. If you go short with 100% BTC in your currency account then you make a profit but likewise your margin balance also goes down. So effectively you are gaining nothing (because your drop in value of your currency account offsets your profit). It's as if you have sold at the original price. If the price goes up you make a loss but also a gain in the value of your currency account, so again effectively no gain. This is at 1:1 leverage. For higher leverages I think you must halve the leverage (I think).

Is this correct Zhoutong?

PoSToken - First PoS Token|Free Airdrop|No ICO
zhoutong
VIP
Hero Member

Offline

Activity: 490

 January 06, 2012, 08:51:12 AM

From the user's perspective:
Mistake 1) will assume he has a typical "maintenance margin requirement" with no idea how close to typical it actually is
Mistake 2) will assume a constant margin balance, when actually that margin balance will decrease as the price of bitcoin decreases
Mistake 3) will calculate the "zhoutonging price" based on the current bid, which will of course change.  Checks back later when the bid is lower, and suddenly their "zhoutonging price" is different than what they calculated using "current bid".  Maybe even zhoutonged already.

Three strikes and you're out.

How about a formula for the "zhoutonging price" which uses variables instead of constants?

1) You're typical unless you explicitly request for a change (which will be rejected most likely).

2) Just a simple tweak will adjust for BTC balance. Original post edited.

3) If current price has changed, the net value should change too. The result should be consistent.

Founder of NameTerrific (https://www.nameterrific.com/). Co-founder of CoinJar (https://coinjar.io/)

Donations for my future Bitcoin projects: 19Uk3tiD5XkBcmHyQYhJxp9QHoub7RosVb
bitcoinBull
Legendary

Offline

Activity: 826

rippleFanatic

 January 06, 2012, 03:19:56 PM

From the user's perspective:
Mistake 1) will assume he has a typical "maintenance margin requirement" with no idea how close to typical it actually is
Mistake 2) will assume a constant margin balance, when actually that margin balance will decrease as the price of bitcoin decreases
Mistake 3) will calculate the "zhoutonging price" based on the current bid, which will of course change.  Checks back later when the bid is lower, and suddenly their "zhoutonging price" is different than what they calculated using "current bid".  Maybe even zhoutonged already.

Three strikes and you're out.

How about a formula for the "zhoutonging price" which uses variables instead of constants?

1) You're typical unless you explicitly request for a change (which will be rejected most likely).

2) Just a simple tweak will adjust for BTC balance. Original post edited.

3) If current price has changed, the net value should change too. The result should be consistent.

Thanks, I'm somewhat relieved now.  Hopefully bitcoinica users will be better on their guard.

A massive influx of new people is already starting.  Most will not be experienced in trading of any sort let alone margin trading.  We know you realize that when your customers are losing, its bad for your business.  So its surprising that the zhoutong price isn't calculated and visible on the user's account stats.

Any chance you'll add this value as a field on bitcoinica, so users don't have to calculate it manually?

College of Bucking Bulls Knowledge
Crypt_Current
Hero Member

Offline

Activity: 686

Shame on everything; regret nothing.

 January 06, 2012, 07:15:46 PM

Alright let's plug in some numbers and see if I have this correct:

5.5 * 90 * 0.04 = 19.8
margin + unrealized P/L = 174
174-19.8 = 154.2
154.2 / 90 = 1.7133333333333333
And so the price at which this position would be Zhoutonged would be current bid - 1.71 ?

I just want to bump this to make sure I understand correctly.

10% off at CampBX for LIFE:  https://campbx.com/main.php?r=C9a5izBQ5vq  ----  Authorized BitVoucher MEGA reseller (& BTC donations appreciated):  https://bitvoucher.co/affl/1HkvK8o8WWDpCTSQGnek7DH9gT1LWeV5s3/
LTC:  LRL6vb6XBRrEEifB73DiEiYZ9vbRy99H41  NMC:  NGb2spdTGpWj8THCPyCainaXenwDhAW1ZT
Koekiemonster
Sr. Member

Offline

Activity: 323

 January 07, 2012, 07:42:41 PM

From the user's perspective:
Mistake 1) will assume he has a typical "maintenance margin requirement" with no idea how close to typical it actually is
Mistake 2) will assume a constant margin balance, when actually that margin balance will decrease as the price of bitcoin decreases
Mistake 3) will calculate the "zhoutonging price" based on the current bid, which will of course change.  Checks back later when the bid is lower, and suddenly their "zhoutonging price" is different than what they calculated using "current bid".  Maybe even zhoutonged already.

Three strikes and you're out.

How about a formula for the "zhoutonging price" which uses variables instead of constants?

1) You're typical unless you explicitly request for a change (which will be rejected most likely).

2) Just a simple tweak will adjust for BTC balance. Original post edited.

3) If current price has changed, the net value should change too. The result should be consistent.

Thanks, I'm somewhat relieved now.  Hopefully bitcoinica users will be better on their guard.

A massive influx of new people is already starting.  Most will not be experienced in trading of any sort let alone margin trading.  We know you realize that when your customers are losing, its bad for your business.  So its surprising that the zhoutong price isn't calculated and visible on the user's account stats.

Any chance you'll add this value as a field on bitcoinica, so users don't have to calculate it manually?

Zhoutong, I think this is quite important. Though your site is pretty clear for people who understand what they're doing I think you should make your site more newcomer-friendly than it is now. Starting with bitcoinbull's suggestion.

ArsenShnurkov
Legendary

Offline

Activity: 1386

 January 08, 2012, 09:52:04 PM

The FULL formula

If you are LONG,

"Zhoutonging price" = current bid - (margin balance + unrealized P/L - (base price * amount * 4%)) / amount

Please explain how "Tolerated loss" is calculated / used

It's not the same as "Maintenance margin".
jothan
Full Member

Offline

Activity: 184

Feel the coffee, be the coffee.

 January 08, 2012, 10:44:21 PM

Thanks for the info, bitcoinica has been great so far !

Bitcoin: the only currency you can store directly into your brain.

What this planet needs is a good 0.0005 BTC US nickel.
M4v3R
Hero Member

Offline

Activity: 607

 January 11, 2012, 09:09:22 AM

I made a simple script for adding this price to the Bitcoinica UI. Looks like this:

Drag it onto your Chrome browser window (should work in any browser that supports Greasemonkey scripts but I didn't test it elsewhere) and you're done. Hope it helps someone!

Note: this is my first real take on UserScripts. Any suggestions are welcome. Also, Bitcoinica UI refreshes in unusual way (instead of updating specific elements they pull whole tables with AJAX). That's why UI could flicker a bit with this (even though I'm intercepting the updater function with my code really early), I can't help with that.

Edit: Second note: this doesn't take account for LIMIT / STOP orders that you have between the current price and the min price. Maybe it will, someday.
somestranger
Hero Member

Offline

Activity: 485

Are You Shpongled?

 January 11, 2012, 09:16:58 AM

I made a simple script for adding this price to the Bitcoinica UI. Looks like this:

Drag it onto your Chrome browser window (should work in any browser that supports Greasemonkey scripts but I didn't test it elsewhere) and you're done. Hope it helps someone!

Note: this is my first real take on UserScripts. Any suggestions are welcome. Also, Bitcoinica UI refreshes in unusual way (instead of updating specific elements they pull whole tables with AJAX. That's why UI could flicker a bit with this, I can't help with that.

Works great in chrome, thanks! Does not seem to be working in Firefox 10 though.
zhoutong
VIP
Hero Member

Offline

Activity: 490

 January 11, 2012, 09:26:16 AM

I made a simple script for adding this price to the Bitcoinica UI. Looks like this:

Drag it onto your Chrome browser window (should work in any browser that supports Greasemonkey scripts but I didn't test it elsewhere) and you're done. Hope it helps someone!

Note: this is my first real take on UserScripts. Any suggestions are welcome. Also, Bitcoinica UI refreshes in unusual way (instead of updating specific elements they pull whole tables with AJAX). That's why UI could flicker a bit with this (even though I'm intercepting the updater function with my code really early), I can't help with that.

Edit: Second note: this doesn't take account for LIMIT / STOP orders that you have between the current price and the min price. Maybe it will, someday.

Founder of NameTerrific (https://www.nameterrific.com/). Co-founder of CoinJar (https://coinjar.io/)

Donations for my future Bitcoin projects: 19Uk3tiD5XkBcmHyQYhJxp9QHoub7RosVb
chunglam
Donator
Full Member

Offline

Activity: 221

 January 11, 2012, 09:30:17 AM

I made a simple script for adding this price to the Bitcoinica UI. Looks like this: