Futures trading on platforms like OKX allows traders to speculate on the price movements of digital assets with leverage. One of the most critical concepts for managing risk and optimizing returns is understanding how the average entry price is calculated. Whether you're opening a new position or adding to an existing one, knowing how this value is determined helps you make informed decisions about entry, exit, and position sizing.
This guide breaks down the mechanics behind average entry price calculation, explains key terminology, and offers practical insights into how OKX processes futures trades.
Understanding Order Matching in Futures Trading
Before diving into average price calculations, it's essential to understand how futures orders are matched on the exchange. OKX uses a standard price-time priority model:
- Price Priority: Higher bids (buy orders) and lower asks (sell orders) get priority.
- Time Priority: Among orders at the same price, the earliest submitted order is executed first.
In futures trading:
- Buy orders include “Buy to Open Long” and “Buy to Close Short.”
- Sell orders include “Sell to Open Short” and “Sell to Close Long.”
When the highest bid meets or exceeds the lowest ask, a trade is executed. This matching process ensures liquidity and fair pricing across the market.
👉 Learn how real-time order matching affects your trade execution and pricing accuracy.
What Is Average Entry Price?
The average entry price (also known as cost basis or open average price) represents the weighted average price at which your current long or short position was opened. It’s crucial for calculating unrealized profit and loss (PnL), setting stop-loss levels, and planning take-profit targets.
When Is the Average Price Updated?
- ✅ Updated: When you open a new position or add to an existing one (e.g., increasing your long BTC position).
- ❌ Not Updated: When you close part or all of your position — your original average entry price remains unchanged.
This means that only opening trades affect your average entry price.
Formula for Calculating Average Entry Price
The average entry price is computed using a weighted average formula that accounts for both previous holdings and new entries.
Core Formula:
Average Price = (Contract Value × (Original Position Size + New Position Size)) /
[(Contract Value × Original Position Size / Original Average Price) +
(Contract Value × New Position Size / New Execution Average)]Let’s break this down step by step.
Step-by-Step Breakdown of Key Components
1. Contract Value
Each futures contract has a defined contract value, representing the notional amount of the underlying asset per contract. For example:
- BTCUSD quarterly contract: $100 per contract
- ETHUSD perpetual: $10 per contract
This value varies by symbol and contract type.
2. Original Position Size
The number of contracts you already hold before placing a new order.
3. New Position Size
The total number of contracts filled in your latest order. This may be executed across multiple prices.
4. Original Average Price
The previously calculated average price of your existing position.
5. New Execution Average (New Open Average)
This is the average price at which your latest order was filled. Since market conditions can split a single order into multiple executions, this value reflects the weighted average of those partial fills.
Formula:
New Execution Average = (Contract Value × Total New Contracts) /
Σ (Contract Value × Contracts Filled at Price N / Price N)Example:
Suppose you place a buy-to-open order for 10 BTCUSDT contracts. The system fills:
- 3 contracts at $39,999.98
- 2 contracts at $40,000.00
- 5 contracts at $40,005.50
Then:
New Execution Average = (10 × 10) /
[(10×3)/39999.98 + (10×2)/40000.00 + (10×5)/40005.50]
≈ $40,001.35Now, if your original position was 20 contracts at an average of $39,800, your updated average entry becomes:
Average Price = (10 × (20 + 10)) /
[(10×20)/39800 + (10×10)/40001.35]
≈ $39,867.21This weighted approach ensures larger positions at certain prices have greater influence on the final average.
Practical Implications for Traders
Understanding how average entry price works enables better trade management:
- 🔍 Accurate PnL Tracking: Unrealized gains/losses depend directly on the difference between current market price and your average entry.
- 📊 Scaling In/Out Strategies: Adding to winning positions ("pyramiding") or averaging down requires precise cost basis updates.
- ⚖️ Risk Control: Knowing your true break-even point helps set appropriate stop-losses.
👉 See how advanced traders use dynamic averaging strategies to improve risk-adjusted returns.
Frequently Asked Questions (FAQ)
Q1: Does closing part of my position change my average entry price?
No. Closing any portion of your position — whether partial or full — does not alter your original average entry price. Only new opening trades affect this value.
Q2: Why is my average entry price different from my limit order price?
Because actual execution often occurs at multiple prices due to order book depth and slippage. Even if you set a limit order at $40,000, partial fills may happen slightly above or below that level based on available liquidity.
Q3: Can I view my current average entry price on OKX?
Yes. In the OKX trading interface, your open positions panel displays:
- Position size
- Average entry price
- Liquidation price
- Unrealized PnL
This data updates in real time as new trades are executed.
Q4: What happens if I reverse my position (e.g., go from long to short)?
If you fully close your long position and open a short, the system treats these as two separate actions:
- First, the long is closed (no change to its historical average).
- Then, a new short position is created with its own average entry price.
Partial reversals will result in net positioning but do not merge long and short averages.
Q5: Is the formula the same for cross and isolated margin modes?
Yes. The calculation logic for average entry price remains consistent regardless of margin mode (cross or isolated). However, risk exposure and liquidation thresholds differ between modes.
Key Keywords for SEO & Search Intent
To ensure this content aligns with what traders are searching for online, here are the core keywords naturally integrated throughout:
- OKX futures trading
- average entry price calculation
- futures contract average price
- how to calculate open average price
- contract value in futures
- order matching mechanism
- weighted average entry price
- BTC futures trading
These terms reflect high-intent queries from active crypto traders seeking clarity on trade execution mechanics.
Final Thoughts
Mastering the concept of average entry price is foundational for serious futures traders. On platforms like OKX, where high-frequency trading and leveraged positions are common, miscalculating your cost basis can lead to poor decision-making and unexpected losses.
By understanding how prices are weighted, how orders are matched, and how averages are updated — you gain greater control over your trading strategy and risk profile.
Whether you're trading BTC, ETH, or emerging assets like XCH and BZZ, precise calculations empower smarter trades.