Forced Liquidation
Many traders have some understanding of digital currency trading, but they know little about what a forced liquidation is, the consequences of a forced liquidation, the rules of a forced liquidation, and how to effectively avoid a forced liquidation to reduce losses, etc. This article will provide a brief explanation of the above.
Forced Liquidation is also known as a cut or closed position. Forced liquidation happens when a trader's trading margin is insufficient and has not been topped up within a specified period of time, or when the number of positions held by a trader exceeds the specified limit and the margin cannot meet the maintenance margin requirements of the position. The trader's corresponding position is forcibly closed in order to prevent further expansion of risk.
A forced liquidation may be triggered by a margin trade in the course of a loss, and once it occurs the trader will lose the margin used for the position. The most important factor in the liquidation process is the maintenance margin, which is the minimum margin requirement for the trader to keep the position. During the loss process, if the margin remaining in the position is equal to or less than the maintenance margin, a Forced Liquidation will be executed.
The closing price of a position is calculated based on the maintenance margin percentage, the entry price and the amount of leverage used, using a reasonable spot price that combines the prices of the spot indexes on the MEME platform. During the trading process, traders need to pay attention to the distance between the marker price and the position's liquidation price, as well as the position's risk level or full position risk level, in order to avoid a forced liquidation of the position.
c) Watching the position: MEME uses the Reasonable Spot Price method to calculate the required maintenance margin for the account. Margin requirements and position leverage may increase or decrease as risk limits change. Traders should check position information and the risk limit level they are in to ensure unnecessary liquidation.
Last modified 9mo ago