Liquidation Mechanism
The forced liquidation mechanism is triggered when a trader’s margin is insufficient to maintain their position, preventing negative balance risks and ensuring the stability of the trading system.
Liquidation Trigger Conditions
Isolated Margin Mode
• Each position’s margin is calculated independently.
• Liquidation is triggered when a position’s Account Margin Ratio ≤ 100% (i.e., when the position’s margin balance is equal to or below its maintenance margin).
• Formula:
Account Margin Ratio = Position Margin Balance / Position Maintenance Margin
Cross-Margin Mode
• All positions share the account’s margin, with a unified Account Margin Ratio.
• Unrealized profit and loss (PnL) is included in the total margin balance.
•Liquidation is triggered when the Account Margin Ratio ≤ 100%.
•Formulas:
• Account Margin Ratio = Account Margin Balance / Total Account Maintenance Margin
• Account Margin Balance = Cross-Margin Available USDT Balance + Cross-Margin Unrealized PnL
• Total Account Maintenance Margin = Sum of Maintenance Margins for All Cross-Margin Positions
Liquidation Process
Liquidation Trigger:
• When the Account Margin Ratio ≤ 100%, the system initiates the forced liquidation process.
2. Cancel Open Orders:
• All unexecuted orders (including standard and strategy orders) in the account are canceled.
3. Tiered Liquidation Based on Risk Limits:
• The system lowers the position’s risk limit by one tier and liquidates the portion of the position exceeding the new limit.
4. Condition Check and Iterative Execution:
• If the Account Margin Ratio rises to ≥ 100% during liquidation, the process stops.
• If the ratio remains below 100%, the system continues lowering the risk limit and liquidating portions of the position until either:
• The Account Margin Ratio reaches 100%, or
• The entire position is liquidated, completing the process.
5. Liquidation Execution:
• During liquidation, the system places orders at the bankruptcy price, prioritizing execution against existing orders in the order book.