To help users better understand the risk control mechanisms in contract trading, SaviCoin provides an explanation of the maintenance margin and forced liquidation mechanisms.
Users are advised to fully understand the maintenance margin, forced liquidation rules, and related mechanisms before engaging in contract trading.
1. What is Maintenance Margin?
Maintenance margin refers to the minimum margin amount that users must maintain during the holding period to keep their current positions open. When the account margin falls below the maintenance margin requirement, the system may trigger the forced liquidation mechanism.
The main purposes of maintenance margin are:
• To prevent further expansion of account losses
• To prevent the account from having a negative balance
• To maintain overall risk stability in the contract market
2. What is Forced Liquidation?
Forced liquidation means that when the user's account risk rate is too high and the account margin is insufficient to maintain the current position, the system will automatically execute a liquidation operation.
The system's forced liquidation mainly serves to:
• Prevent account overdrafts
• Prevent continuous expansion of losses
• Control overall market risk
3. Conditions Triggering Forced Liquidation
When the account margin falls below the maintenance margin requirement, the system will automatically trigger forced liquidation. The triggering conditions for different position directions are as follows:
1. Long Position Forced Liquidation
When the mark price: ≤ forced liquidation price, the system will trigger forced liquidation.
That is, when the market price falls below the risk line, the system automatically sells to close the position.
2. Short Position Forced Liquidation
When the mark price: ≥ forced liquidation price, the system will trigger forced liquidation.
That is, when the market price rises above the risk line, the system automatically buys to close the position.
4. What is Mark Price?
Mark Price refers to the reference price used by the platform for risk control and forced liquidation calculations.
The mark price is usually based on:
• Index price
• Market fair price
• Risk control mechanisms
and is calculated comprehensively. The mark price is mainly used for:
• Forced liquidation calculation
• Risk control
• Preventing erroneous forced liquidation caused by abnormal price fluctuations
Forced liquidation usually refers to the mark price rather than the latest transaction price.
5. Forced Liquidation Price Calculation Explanation (Example: USDT-Margined Contracts)
1. Isolated Margin Mode
In isolated margin mode, only the margin of the current position bears the risk.
That is, losses from a single position will not affect the funds of other positions in the account.
Long position forced liquidation price calculation: Forced liquidation price = (Position value - (Position margin - Maintenance margin - Fees)) ÷ Position quantity
Short position forced liquidation price calculation: Forced liquidation price = (Position value + (Position margin - Maintenance margin - Fees)) ÷ Position quantity
2. Cross Margin Mode
In cross margin mode, the entire contract account balance jointly bears the risk.
That is, the entire available balance of the account may be used to maintain positions.
Long position forced liquidation price calculation:
Forced liquidation price = (Position value - (Account balance - Maintenance margin - Fees)) ÷ Position quantity
Short position forced liquidation price calculation:
6. Factors Affecting Forced Liquidation Price
1. Maintenance Margin Rate
The maintenance margin rate dynamically adjusts based on position size, leverage ratio, and risk level.
2. Market Volatility
During sharp market price fluctuations, the forced liquidation price may change. Extreme market conditions may include:
• Price gaps
• Insufficient liquidity
• Severe market volatility
3. Fees and Margin Occupancy
Factors such as closing fees and margin occupied by pending orders also affect the actual forced liquidation price.
7. Post-Forced Liquidation Handling Mechanism
When the system triggers forced liquidation, it will automatically execute the position liquidation. After forced liquidation is completed, any remaining funds (if any) will be returned to the user's account. If there is severe market volatility, the actual transaction price may differ somewhat from the forced liquidation price.
8. Special Notes
1. Maintenance Margin is Non-Refundable
The maintenance margin mainly serves to prevent account overdraft risks. Therefore, after forced liquidation, the maintenance margin is generally not fully refunded.
2. Extreme Market Risks
Under extreme market conditions, situations such as slippage, price gaps, insufficient liquidity, and transaction delays may occur.
9. Risk Warning
Digital asset contract trading carries high risks and high volatility. Leveraged trading can amplify both profits and losses. Users should fully understand before trading:
• Contract rules
• Margin mechanisms
• Forced liquidation mechanisms
• Leverage risks
• Market risks
Trade rationally and pay attention to risks.
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