What's Futures Forced Liquidation

What is Forced Liquidation?

To keep the positions open, there should be a certain percentage of position value reserved by the traders, and it is the Maintenance Margin. When your maintenance margin cannot fulfill the maintenance requirement, your Futures position will be liquidated.

CoinEx Futures Contract employs Fair Price Marking to avoid position liquidation due to illiquid markets or manipulation, that is, the position liquidation will be triggered when the Fair price (or Mark price) is lower (Longs) or higher (Shorts) than the liquidation price.

Once the liquidation is triggered, your position will be systematically taken over by the liquidation engine at the bankruptcy price and closed in the market.

 

Liquidation Price

1. Overview: The triggered price of liquidation. If the mark price is lower than this price (longs), or higher than this price(shorts), the contract will start the liquidating process.

2. Bankruptcy Price: it refers to the price when all the margin of current position is deducted, or in other words, the margin reaches 0.

3. Calculation (Take Linear Contract as an example):

(1) Long Position

Liquidation Price = Avg. Open Price * (1 - Margin Ratio + Maintenance Margin Rate)

Bankruptcy Price = Avg. Open Price * 1 - Margin Ratio)

(2) Short Position

Liquidation Price = Avg. Open Price * (1 + Margin Ratio - Maintenance margin rate)

Bankruptcy Price = Avg. Open Price * (1 + Margin Ratio)

Among them:

Cross Margin Ratio = (Available Balance + Position Margin - Unrealized PNL) / Avg. Open Price

Isolated Margin Ratio = (Position Margin - Unrealized PNL) / Avg. Open Price

Notes:

For other Linear Contract calculations, please refer to here.

For the Inverse Contract calculations, please refer to here.

(3) Data Update

When any of the following operations are performed, the forced liquidation price and bankruptcy price need to be recalculated

(Isolated) Add Position, Close Position, Add Margin Call, Reduce Margin, Adjust Leverage

(Cross) Add Position, Close Position, Add New Position Order (For it will reduce the available balance)

4. Notice: When the margin is big enough, there will be a situation where the liquidation price is  0 for long positions. At this time, the liquidation price is displayed as 0.

 

Alert on Liquidation

CoinEx will calculate the liquidation risk of your position. When the liquidation risk reaches 70%, an alert on futures liquidation will be notified by email or push. Please pay attention to the information sent by CoinEx.

 

Calculation of Liquidation risk

(Isolated) Liquidation Risk = Maintenance Margin / Position Margin * 100%

(Cross) Liquidation Risk = Maintenance Margin / (Available Margin + Position Margin) * 100%