Liquidation is an automatic procedure that occurs if reserved margin becomes insufficient to cover further losses for a trade. If liquidation occurs, a position will be automatically closed at market.
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In margin trading, liquidation is an automatic procedure that can occur if a trade is incurring loses and the trader's margin is no longer sufficient to cover further losses from the trade. If a position reaches its liquidation point, the trade will be immediately closed at market, i.e. liquidated.
Liquidation may occur at different margin thresholds, depending on the margin type used in a trade - Isolated or Cross
Below are detailed explanations for each type of Margin system.
For Isolated Margin positions, an Estimated Liquidation Price is automatically provided. This reflects the estimated price level at which a position will be liquidated, due to a trader’s margin no longer being sufficient to cover further losses if the market moves against the trade:
It is important to keep in mind that the EST. liq. price is an estimated value based on the available margin remaining in a trade. This means that the estimated liquidation price of an isolated-margin position can change. This can occur when:
Funding is charged for carrying a position into a new funding rollover
Adding/removing margin in a trade
Change in multiplier during extreme market volatility
If an isolated margin position reaches its liquidation point, the trade will be immediately closed market.
For Cross Margin positions, liquidation occurs if Cross Margin Level drops to or below 10%:
The Cross Margin Level indicators provide traders with an easy way to keep track of cross margin trades, without having to manually perform all of the related calculations. The gauges will fill up as more margin is pulled into a cross-margin trade. A green indicator reflects a sufficient level of available margin remaining, while a red indicator means that available margin is at a critical level and the position may be at risk of liquidation. Liquidation may occur if Cross Margin Level drops to 10% or below.
Essentially the Cross Margin Level indicators provide the following information in an easy to understand graphical format:
As more margin is pulled into a trade, the gauge will fill up accordingly
Liquidation occurs if cross margin level drops to or below 10%
If cross margin level is below 100%, it will not be possible to open new positions using the corresponding margin currency
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