When initiating an investment order on Swing, you will notice the investment Risk Ratio displayed as depicted below.
So what does this indicator mean and how is it calculated? Let's read through the article below to clearly understand the concepts related to Swing Risk ratio.
Key Concepts
PnL (Profit and Loss): The gain or loss on an investment before deducting any fees.
PnL after fee (Paf): The gain or loss on an investment after deducting fees.
Open price (OP): The average price at which the investment was opened.
Mark price: The current price of the asset (not applicable for closed investments).
Close price: The average price at which the investment was closed (not applicable for ongoing investments).
Leverage: The ratio used to amplify the investment's exposure.
Size: The total value of the investment, including leverage. For example, if you invest $20 with a leverage of 40, the size of the investment is $800.
Inital Capital: The initial amount of money you put into the investment.
Initial Capital = Size / Leverage.
Initial Capital after Fees (ICaF): The initial capital after deducting maintenance fees.
Current Capital (CC): The current amount of money you have in the investment after accounting for Paf or Laf.
For instance, if your initial capital was $20 and you have a loss after fees (Laf) of $12, your current capital would be $8. Conversely, if you have a profit after fees (Paf) of $12, your current capital would be $32.
Current Capital Ratio (CCR): The percentage of current capital relative to the size of the investment,
Current Capital Ratio (CCR) = CC / Size * 100%.
For example, if you invested $20 with leverage of 40 (size $800) and currently have a loss after fees of $5, then:
CC = $20 - $5 = $15
CCR = $15 / $800 * 100% = 1.875%
Maintenance Capital Ratio (MCR): The minimum capital ratio required to keep the investment running. If the CCR falls below this level, the investment will be liquidated.
Risk Levels
The risk level of your investment in Swing is determined based on the relationship between the CCR and MCR. There are three risk levels:
High Risk: When CCR is less than 1.1 times the MCR.
Moderate Risk: When CCR is between 1.1 and 1.3 times the MCR.
Safe Risk: When CCR is greater than 1.3 times the MCR.
Example
Assume MCR for a BTC investment is 0.5%. If you have an investment with a size of $800 and an initial capital of $20, here's how the risk levels play out:
If your loss after fees (Laf) is $5:
CC = $20 - $5 = $15
CCR = $15 / $800 * 100% = 1.875% > 1.3 * 0.5%
Since CCR > 1.3 * MCR → Safe risk
If the loss increases to $16:
CC = $20 - $16 = $4
CCR = $4 / $800 * 100% = 0.5%
Since CCR < MCR → High Risk
If your loss after fees (Laf) is $10:
CC = $20 - $10 = $10
CCR = $10 / $800 * 100% = 1.25%
Since 1.1 * MCR < CCR < 1.3 * MCR → ModerateRisk
In conclusion, if your CCR is above 1.3 times the MCR (e.g., 1.3 * 0.5% = 0.65%), your investment is considered at safe risk. If it falls between 1.1 and 1.3 times the MCR, it is considered at moderate risk. And if your CCR is below 1.1 times the MCR , your investment is considered at high risk.