1. What is Forced Liquidation?
To maintain a position, investors must hold a certain percentage of the position value as margin, known as the Maintenance Margin.
When your position margin falls below the required maintenance margin, the contract will be forcibly liquidated.
For long positions, liquidation occurs when the mark price is lower than the liquidation price.
For short positions, liquidation occurs when the mark price is higher than the liquidation price.
2. Liquidation Price
The liquidation price is the trigger price at which forced liquidation occurs.
If the mark price is below this price (long) or above this price (short), the contract will enter the liquidation process.
Calculation Formula (USDT-M contracts as an example):
Isolated Margin Mode (USDT-M):
Long:
Entry Price – (Position Margin – Maintenance Margin – Fees) ÷ Position SizeShort:
Entry Price + (Position Margin – Maintenance Margin – Fees) ÷ Position Size
Cross Margin Mode (USDT-M):
Long:
Entry Price – (Account Balance – Maintenance Margin – Fees) ÷ Position SizeShort:
Entry Price + (Account Balance – Maintenance Margin – Fees) ÷ Position Size
3. Risk Management Tips
Monitor Market Volatility: Pay close attention during high volatility periods to avoid unexpected liquidation risks.
Set Stop-Loss Orders: Use stop-loss to limit potential losses and prevent forced liquidation.
Utilize Risk Control Tools: Take advantage of tools like isolated mode, cross mode, and auto-reduction to better manage positions and risks.