What is Forced Liquidation
Forced liquidation occurs when traders fail to maintain a required percentage of margin, known as the maintenance margin. If the position margin falls below this threshold, the system will forcibly liquidate the position.
CoinEx uses the mark price to determine the trigger of forced liquidation. It is triggered when the mark price of the futures contracts (for long positions) falls below or (for short positions) rises above the liquidation price. This mechanism helps mitigate unexpected liquidation risks caused by insufficient market liquidity or price manipulation.
🔗 Learn More: What is Mark Price
In the event of forced liquidation:
- The system will take over the positions at the bankruptcy price and close them in the market.
- All pending orders using the same crypto as margin will be canceled to prevent risk escalation, including take-profit/stop-loss orders, limit orders, and stop-market orders.
Liquidation Price and Bankruptcy Price
1. What is Liquidation Price?
The liquidation price is the trigger price for forced liquidation. When the mark price of the futures contracts (for long positions) falls below or (for short positions) rises above the liquidation price, the system will forcibly liquidate the positions.
🔗 Learn More:
How to Calculate Liquidation Price For Linear Contract
How to Calculate Liquidation Price For Inverse Contract
2. What is Bankruptcy Price?
The bankruptcy price is the market price at which the margin of the current position is wiped out, that is, when the margin of the position is 0.
3. Calculation (Using linear contracts as examples):
(1) For long positions:
- Liquidation Price = Settlement Price × (1 - Maintenance Margin Rate) / (1 - Initial Margin Rate)
- Bankruptcy Price = Settlement Price × (1 - Maintenance Margin Rate)
(2) For short positions:
- Liquidation Price = Settlement Price × (1 + Maintenance Margin Rate) / (1 + Initial Margin Rate)
- Bankruptcy Price = Settlement Price × (1 + Maintenance Margin Rate)
Key parameters:
- Maintenance Margin Rate (Cross Margin) = (Available Balance + Position Margin - Unrealized PnL) / Settlement Value
- Maintenance Margin Rate (Isolated Margin) = (Position Margin - Unrealized PnL) / Settlement Value
- Settlement Value = Position Size × Settlement Price
- The Maintenance Margin Rate is proportional to the user’s current position size and varies between different futures contracts at different position levels. Please refer to the Position Level Table of futures contracts for details.
🔗 Learn More:
- Settlement price calculation: What is Settlement Price
- Linear contract calculation: Linear Contract Trading Tutorials (Web｜App)
- Inverse contract calculation: Inverse Contract Trading Tutorials (Web｜App)
(3) Price Updates
The liquidation price and bankruptcy price are recalculated whenever the following actions occur:
- Isolated Margin: Adding positions, closing positions, adding margin, reducing margin, or adjusting leverage.
- Cross Margin: Adding positions, closing positions, or placing new orders (which reduces available margin).
Note:
- If the deduction of funding fees reduces the margin, the liquidation price will also change accordingly.
- For long positions, the liquidation price may be ≤ 0 when the account has sufficient margin. In this case, the liquidation price will be displayed as 0.
Liquidation Warnings
CoinEx reflects the liquidation risk using the “Liquidation Risk Rate”.
1. When the liquidation risk rate reaches 70%, CoinEx will notify users via email or push notification to help them manage risks.
2. Liquidation risk rate
- For Isolated Margin: Liquidation Risk Rate = Maintenance Margin / Position Margin × 100%
- For Cross Margin: Liquidation Risk Rate = Maintenance Margin / (Available Balance + Position Margin) × 100%
Key Parameters:
- Maintenance Margin = Position Value × Maintenance Margin Rate
- Position Value = Mark Price × Position Size
- The Maintenance Margin Rate is proportional to the user’s current position size and varies between different futures contracts at different position levels. Please refer to the Position Level Table of futures contracts for details.