Trading basics
Forced reductions and liquidations on Bitget
Beginner
2023-02-21 | 5m
Global Bitgetters,
Let's discuss forced reductions and liquidations to help our users better understand how to
trade futures on Bitget.
Isolated margin mode
1) Under what conditions are forced reductions or liquidations triggered?
When your account doesn't have enough to meet the maintenance margin, or the actual margin rate of your position is less than or equal to the maintenance margin rate (or MMR), a forced reduction or liquidation is triggered.
Position's margin rate = (margin + unrealized PnL) ÷ position (USDT) - taker feePosition = number of positions × average position price
Note the maintenance margin rate or MMR includes the clearance fee rate or taker fee for all calculations.
2) How do I calculate the forced reduction or liquidation?
For long positions:
(Average entry price × position size - initial margin × the lates t price of the underlying asset under the current margin) ÷ (1 - MMR)
For short positions:
(Average entry price × position size + initial margin × the latest price of the underlying asset under the current margin) ÷ (1 + MMR)
Note the maintenance margin rate or MMR includes the clearance fee rate or taker fee for all calculations.
3) How do I avoid forced reductions and liquidations?
A margin call is a demand to deposit additional funds after the trader's margin account falls below the required amount. Investors can avoid margin calls by keeping enough funds in their account to maintain the value of their maintenance margin.
However, when users are at risk of forced reduction or liquidation, they can answer the margin call by depositing into their margin account.
The margin call is:
Current margin position + current unrealized PnL
Cross-margin mode
1) Under what conditions are forced reductions or liquidations triggered?
When the
margin ratio of the cross-margin position is less than 1, a forced reduction or liquidation is triggered. The margin ratio measures the risk of an investor's position.
Margin ratio = (total maintenance margin value in cross-margin account + maintenance margin for all commissioned orders both in cross-margin and isolated account) ÷ (total assets + total unrealized PnL)
Maintenance margin = position value × MMR.
Note the maintenance margin rate or MMR includes the clearance fee rate or taker fee for all calculations.
Forced reduction or liquidation logic: When the conditions are triggered, and two-way orders and one-way orders coexist, all two-way orders will be at risk of forced reduction or liquidation first.
2) How do I calculate the liquidation price?
If the net position is long:
If the net position is short:
Net position value = the latest price of the pair × the net position's absolute volume ÷ the latest price of the margin currency
W = the net position value of the pair / the sum of the net position value of all pairsIndex = the index price of the current margin currency
Note the maintenance margin rate or MMR includes the clearance fee rate or taker fee for all calculations.
3) How do I avoid forced reductions or liquidation?
Investors can avoid margin calls by keeping enough funds in their account to maintain the value of their maintenance margin. However, when users are at immediate risk of forced reduction or liquidation, they can answer the margin call by depositing the required balance into their margin account.
Forced reduction and liquidation of futures contracts
When a forced reduction is triggered on a futures contract, the following steps occur:
1. The system determines whether there is still a live order. If there is, the order is automatically closed before proceeding to the next step.
2. The system determines the position's Maintenance Margin Rate (MMR) tier currently at risk. If the position tier is more than 2, the system will forcibly reduce the position to reach the lowest tier (tier 1), two tiers at a time. If the position tier is 2, the system automatically reduces the tier to 1.
3. If the position is in the first tier and the forced reduction is still being triggered, the position will be liquidated.
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