How to calculate the average entry price (avg buy) in Gate.io derivative products

The average entry price is one of the key parameters that every trader must understand when working with derivative instruments. This metric shows the weighted average cost of your position when making multiple purchases at different prices. On the Gate.io platform, the average entry price (avg buy) is calculated differently depending on the type of contract you are using.

Why is it important to understand the average entry price

First of all, let’s clarify why this information is needed. When a trader enters a position multiple times — for example, buying first at $10,000, then at $12,000, and then at $11,000 — they need to know their actual average price. This helps accurately calculate profit and loss, determine take-profit and stop-loss levels. On Gate.io, calculations are done automatically, but understanding the mechanics will help you better control your risks.

Calculation of avg buy for inverse contracts

Inverse perpetual and futures contracts have a feature: they are quoted in USD but calculated in cryptocurrency, for example in BTC. This specificity affects the formula for calculating the average entry price.

Formula for inverse contracts:

Average entry price = Total contract amount / Total contract value

where total contract value = [(Quantity₁ / Price₁) + (Quantity₂ / Price₂) + (Quantity₃ / Price₃) + …]

Calculation example:

Let’s consider trading BTCUSD on Gate.io. A trader made two purchases:

• First purchase: 50 contracts of BTCUSD at $10,000
• Second purchase: 50 contracts of BTCUSD at $15,000

Total contract value in BTC = (50 / 10,000) + (50 / 15,000) = 0.005 + 0.00333333 = 0.00833333 BTC

Average entry price = 100 / 0.00833333 ≈ $12,000

This means that despite different entry prices ($10,000 and $15,000), your actual position is opened at an average level of $12,000.

Calculation of avg buy for USDT perpetual contracts

USDT perpetual contracts operate on a different principle. They are quoted and calculated in USDT, which simplifies calculations significantly. The formula here is more intuitive and similar to a standard weighted average price calculation.

Formula for USDT contracts:

Average entry price = Total contract value / Total contract amount

where total contract value = [(Quantity₁ × Price₁) + (Quantity₂ × Price₂) + (Quantity₃ × Price₃) + …]

Calculation example:

Consider trading BTCUSDT on Gate.io. A trader opened a position twice:

• First purchase: 1 contract of BTC at 10,000 USDT
• Second purchase: 2 contracts of BTC at 13,000 USDT each

Average entry price = (1 × 10,000 + 2 × 13,000) / (1 + 2) = (10,000 + 26,000) / 3 = 36,000 / 3 = $12,000 USDT

In this case, the average entry price is 12,000 USDT, reflecting the actual weighted cost of your position.

Calculation of avg buy for USDC perpetual contracts

USDC perpetual contracts on Gate.io have a unique feature: the average entry price is recalculated at the end of each settlement cycle. The increase in position size during the period influences the new average, and the marking price at the time of settlement becomes the new base average entry price.

Formula for USDC contracts:

Average entry price = Total session value / Total position size

where total session value = [(Trade price₁ × Trade size₁) + (Trade price₂ × Trade size₂) + …]

Calculation example:

Consider a scenario with BTCUSDC on Gate.io:

Trader A opens a long position of 0.5 BTC at an entry price of $50,000. Then, they decide to increase the position by opening an additional 0.8 BTC at an entry price of $51,000.

Total session value = (50,000 × 0.5) + (51,000 × 0.8) = 25,000 + 40,800 = 65,800 USDC

Average entry price = 65,800 / (0.5 + 0.8) = 65,800 / 1.3 ≈ $50,615.38

Remember that at the end of the settlement cycle, the current mark price will override your average entry price, setting a new baseline for the next period.

Practical application of calculating avg buy

Understanding how the average entry price (avg buy) is calculated is critical for risk management. Knowing this metric allows you to:

• Precisely determine at what level your position starts to be profitable
• Calculate optimal stop-loss and take-profit levels
• Decide whether to add to your position when the price drops
• Track your actual trading profitability on Gate.io

Each contract type on Gate.io requires understanding its specific method of calculating the average entry price, so before trading, make sure you are working with the correct instrument type and understand how the platform computes your avg buy.