What exactly is the mark price? Why is it essential to understand it in contract trading?

Have you ever experienced this—your position still has profits, but you suddenly get liquidated? The issue might be with the mark price.

Core Concept in Simple Terms

Mark Price = Weighted average of spot prices from multiple exchanges + Exponential Moving Average (EMA) of the basis index

The purpose of this calculation is straightforward: to prevent price manipulation on a single exchange from harming your contract position. The mark price is more objective, reflecting the true supply and demand across the entire market, not just the price of the most recent trade.

Mark Price vs Last Traded Price

These two are easily confused but very different:

• Last Traded Price: The price of the most recent transaction, which can be manipulated by short-term sell-offs or pumps
• Mark Price: A smoothed reference price representing broader market consensus

Example: BTC just had a big sell-off trade at 9000 USDT, dropping the last price to 9000, but the mark price is still at 9050. If you use the last price, you might get unnecessarily liquidated; using the mark price can help avoid this.

How to Use It

Calculate your real liquidation price: Before opening a position, use the mark price to calculate the liquidation point. It’s more accurate than using the last traded price and can help you avoid being wiped out by short-term volatility.

Set stop-losses more effectively: Many professional traders set stop-losses near the mark price, not just following the last traded price. This protects your position and reduces the chance of being stopped out by a fake breakout.

Use limit orders to catch the bottom: Place limit orders near the mark price. When the market returns to a reasonable price, your order gets filled automatically, so you don’t miss out on opportunities.

Risk Warning

Although the mark price is more stable, it’s not perfect. In extreme market conditions (such as a flash crash), the mark price may still lag behind, and you could still face forced liquidation. So never forget: always use a combination of risk management tools—don’t rely on a single indicator.