What Is Liquidation?

When the risk rate of the position reaches 100%, that is, when the user's margin balance is lower than the maintenance margin, liquidation will be triggered. It is recommended that users pay attention to the risk rate of positions, and set up a stop-profit and stop-loss strategy in advance to avoid liquidation.

Risk Rate Calculation Formula:

Risk Rate = Maintenance Margin / Margin Balance * 100%

Partial Liquidation and Liquidation

FameEX Futures adopts a tiered liquidation mechanism to avoid a one-time liquidation for users with huge asset positions.

(1) Cancel Order

In the isolated margin mode, when liquidation is triggered, the system will cancel all open orders of the current position; while in the cross margin mode, the system will cancel open orders of all positions.

(2) Self-Traded

In the hedge position mode, if the user holds long positions and short positions of the same symbol, the system will automatically execute the long-short hedging position at the market price. After the transaction is completed, the system will recalculate the risk rate of the position. If the risk rate is less than 100%, the liquidation process will be stopped; but if the risk rate is still greater than or equal to 100%, the forced liquidation process will proceed.

(3) Reduce Positions

According to the position tier, when liquidation is triggered, if the user's position is not at the lowest level, the system will try to lower the position tier and reduce the position, that is, forcibly reduce the position to the upper limit of a certain level to reduce the user's position level until the risk rate is less than 100%. 

If the user's position is already at the lowest level and the risk rate is still greater than or equal to 100%, that is, the margin balance is still less than or equal to the current level maintenance margin, all positions will be liquidated.

If the user only forcibly reduces the position and lowers the position without triggering all liquidation, the user will continue to hold the remaining positions after the forced reduction.

Liquidation Fees

After liquidation, the platform will collect the remaining funds for the corresponding position as a liquidation fee. If the position goes bankrupt, compensation will be made from the risk reserve wallet.

When the balance of the risk reserve account is not enough to cover the bankruptcy, some profitable users will be forced to stop making profits, and they will make a transaction with the bankruptcy user to stop the loss. View more about ADL >>>

Est. Liquidation Price

The estimated liquidation price refers to the estimated price at which the contract position triggers liquidation, that is, this is a price when the risk rate is equal to 100%. The estimated liquidation price is only for users' reference, because the market price is always floating, and the liquidation will be closed at the bankruptcy price. Therefore, the last price may deviate from the estimated liquidation price.

The calculation for Est. Liquidation Price:

The estimated liquidation price is the price at which the risk rate is 100%. According to the calculation formula of the risk rate,

Risk Rate = Maintenance Margin / Margin Balance * 100%

So, the latest price when the margin balance is equal to the maintenance margin is the estimated liquidation price.

Bankruptcy Price

The bankruptcy price refers to the price at which the contract margin balance is equal to 0. When the risk rate reaches 100%, that is, when the margin balance is lower than the maintenance margin, a tiered partial liquidation or forced liquidation will be triggered, and the system will place a closing order at the bankruptcy price, but the last transaction price must be based on the actual order.