Process of forced liquidation of positions – Help Center

Liquidation Mechanism on DeeBit Exchange

DeeBit Exchange uses the Mark Price to prevent forced liquidations caused by insufficient liquidity or market manipulation. Depending on the leverage mode (Isolated/Cross Margin), the liquidation trigger effects differ:

Liquidation in Isolated Margin Mode

In Isolated Margin mode, when the account margin ratio of a position ≤ 100% (i.e., the margin balance is equal to or below the maintenance margin of the position), the position will trigger forced liquidation.

In Isolated Margin mode, each position has an independent account margin ratio, and whether a position triggers liquidation is determined independently.

Account Margin Ratio = Margin Balance of the Position / Maintenance Margin of the Position

Note: If a user holds dual positions in Isolated Margin mode, both positions are independent, and extreme market fluctuations may result in the liquidation of both positions separately.

Liquidation in Cross Margin Mode

In Cross Margin mode, all positions share the margin in the account, and the account margin ratio is unified. Unrealized profits and losses are included in the total margin balance. When the margin ratio ≤ 100%, forced liquidation will be triggered.

Cross Margin Account Margin Ratio = Account Margin Balance / Total Maintenance Margin of the Account

Account Margin Balance = USDT Balance in Cross Margin + Total Unrealized Profits in Cross Margin

Total Maintenance Margin = Sum of Maintenance Margins for All Positions in Cross Margin

Additional Notes

For a detailed explanation of Isolated/Cross Margin modes, please refer to the Position Mode Introduction.

Liquidation Process

1.Trigger Condition: When the account margin ratio ≤ 100%, the system will trigger forced liquidation.

2.Cancel Orders: The system will cancel all unfilled orders (including strategy orders).

3.Adjust Risk Limits for Tiered Liquidation: The system will lower the risk limit of the contract position by one tier and liquidate the portion exceeding the limit.

4.Determine Whether to Stop Liquidation: During the tiered liquidation process, the system will check if the account margin ratio has recovered to 100%. If it has, liquidation stops; if not, the system continues to lower the risk limit and repeats the process until the account margin ratio recovers to 100% or all positions are cleared, completing the liquidation.

Liquidation Notes

1.After triggering liquidation, the system will place orders at the bankruptcy price of the position. For details on bankruptcy price calculation, refer to: Liquidation Price and Bankruptcy Price.

There are two scenarios after liquidation:

If the actual execution price is better than the bankruptcy price, the system executes at the market price, settles the remaining margin, and the process ends.
If the actual execution price is worse than the bankruptcy price and the Mark Price exceeds the bankruptcy price, the Insurance Fund and Auto-Deleveraging (ADL) system will be activated. If the Mark Price does not exceed the bankruptcy price, the position will be locked until the order is filled.

Note: Bankruptcy price orders are not part of the liquidation process but are a factor in liquidation.

2.In Isolated Margin mode, since the margin for each position is calculated independently, there is no order of liquidation for contracts. In Cross Margin mode, the liquidation order is determined by market liquidity from high to low.

For example, if there are multiple market contracts in the account at the time of liquidation, the system will prioritize the contract with the highest liquidity and begin liquidation. If the account margin ratio does not recover to 100% after clearing the position, the system will proceed to the next market contract. If the account margin ratio recovers to 100% at any point during liquidation, the process ends.

Note: Detailed liquidation records can be viewed in "Liquidation History."

Frequently Asked Questions

Q1: How to Reduce Liquidation Risk?

Refer to the Beginner's Guide to Avoiding Liquidation.

Q2: What is the Difference Between Liquidation in Isolated and Cross Margin Modes?

Isolated Margin Mode: The margin for each position in the account is calculated independently. Losses from liquidation only affect the margin of the corresponding position. For example, opening a position with 100 USDT at 10x leverage requires only 10 USDT as margin. If the position is liquidated, the maximum loss is 10 USDT.
Cross Margin Mode: In Cross Margin mode, all positions share a unified margin ratio. During liquidation, regardless of whether a position is profitable or not, it may be liquidated. The system will prioritize markets based on liquidity and proceed with liquidation in order. At the end of liquidation, all positions in the account may be sold, or some positions may remain, depending on whether the account margin ratio recovers to 100%.

For more details, refer to the Position Mode Introduction.

Q3: What is the Insurance Fund, and How is it Related to Liquidation?

The Insurance Fund comes from the remaining funds after liquidation. If the execution price during liquidation is better than the bankruptcy price, the difference is added to the Insurance Fund. If the Mark Price exceeds the bankruptcy price and the position cannot be filled, the Insurance Fund is used for compensation.

Q4: How is the Liquidation Price Calculated? What is the Contract Multiplier?

The calculation of the liquidation price varies depending on the contract type. For more details, refer to Estimated Liquidation Price and Bankruptcy Price Calculation. BTC-margined perpetual contracts do not have a multiplier, while USDT-margined perpetual contracts adjust the price unit through a multiplier, such as the ETCUSDT contract with a multiplier of 0.1.

Q5: What is the Auto-Deleveraging (ADL) Process?

After liquidation, if the market cannot absorb the remaining position and the Insurance Fund is insufficient to cover the loss, the ADL system will select the most profitable opposing position for deleveraging.

The final execution will be at the bankruptcy price. For details, refer to Estimated Liquidation Price and Bankruptcy Price Calculation.

The final interpretation of this product belongs to DeeBit Exchange.