Forced liquidation

Forced liquidation occurs when the margin falls to the maintenance margin level, meaning that a trader's margin is insufficient to cover losses on their positions. When the mark price reaches the liquidation price, the forced liquidation is triggered, resulting in the closing of the position and the loss of all maintenance margin.

Key Points About Forced Liquidation:

• Use of Mark Price for Forced Liquidation:
  XTrust uses the mark price methodology for forced liquidation to avoid liquidations triggered by lack of liquidity or market manipulation.

• Leverage Tier Requirements:
  As positions increase in size, the required margin levels also rise. If a large position triggers liquidation, there is a risk of unsafe liquidation that could impact the market. XTrust's liquidation engine can utilize additional margin to effectively manage large liquidations.

• Cancellation of Open Orders:
  If liquidation is triggered, XTrust will cancel all unexecuted orders for that contract to release margin and maintain the position. Orders for other contracts will remain unaffected.

• Partial Liquidation Method:
  XTrust employs a partial liquidation method, gradually reducing margin requirements to avoid the liquidation of the entire position.

• Cross Margin Mode:
  In cross margin mode, all available funds will be used as margin for the position. However, it's important to note that available funds lost in one position will not serve as margin for other cross positions.

Liquidation Price Calculation Formulas:

• Long Position [UP]:
  Liquidation Price = (Average Opening Price × Quantity × Contract Size + Maintenance Margin - Position Margin) / (Quantity × Contract Size) (rounded up)

• Short Position [DOWN]:
  Liquidation Price = (Average Opening Price × Quantity × Contract Size - Maintenance Margin + Position Margin) / (Quantity × Contract Size) (rounded down)

What Happens to Margin After Liquidation?

• Loss Exceeds Margin:
  If the trader's losses exceed their margin, the entire margin will be lost, and the trader will no longer hold that position.

• Loss Less Than Margin:
  If the trader's losses are less than their margin, the position will be liquidated, and the remaining margin will be refunded to the trader.

Important Note:

Forced liquidation is an irreversible process, and traders cannot control the execution time or price. This may lead to additional losses, especially during periods of high market volatility. Therefore, traders should fully understand the implications, triggering conditions, and potential risks of forced liquidation when trading cryptocurrencies. By managing position risk prudently, setting stop-loss orders, and promptly replenishing margins, traders can minimize the negative impact of forced liquidation and ensure the safety of their trades.