Key Words: Forced-Liquidation Engine, Margin Rate, Insurance Fund
1. Margin Rate
The most critical indicator for measuring the account risks.
When the margin rate falls to 0%, the account will trigger a forced liquidation, which is the only basis for the forced liquidation of the account.
The higher the margin rate, the lower the risk, and vice versa.
Calculation method:
Margin Rate = Net Asset Value / Total Initial Margin - Adjustment Factor
The adjustment factor is to prevent position overruns, which is currently set at 10%.
For example:
The net asset value is 150 USDT and the total initial margin is 15 USDT.
Margin Rate = 150/15 - 10% = 990%
When the equity falls to 1.5 USDT, 1.5/15 - 10% = 0, which triggers the forced liquidation.
2. Forced Liquidation in Isolated Margin Mode
1. Forced-Liquidation Engine
If a user's position loses 90% of the principal (trading fees and funding fees included), it will be closed and taken over by the forced-liquidation engine.
2. Forced Liquidation
If a liquidation position is traded at a price better than the bankruptcy price (a price at which the principal is 0), a liquidation premium will be generated. This part of the premium will be injected into the Insurance Fund to cover any deficit when the close price is worse than the bankruptcy price.
3. Insurance Fund
Insurance Fund is set up by the platform as financial guarantees to maintain the normal operation of futures trading, which is used to protect traders from negative equity and being held accountable for excessive loss.
4. Changes of Estimated Liquidation Price in Isolated Margin Mode
Changes may occur to orders' estimated liquidation price in Isolated Margin Mode due to the following factors.
- Margin adjustments (including margin increases or decreases) performed by the user during holding positions
- Settlement of funding charges (including paying or obtaining funding fees) for positions
3. Forced Liquidation In Cross Margin Mode
In Cross Margin Mode, the margin of all positions and the remaining funds in the account will be shared to bear the risk. This means that each position can lose more than the margin of that specific position. When continuous losses lead to the account reaching the liquidation point, all positions will be forced to liquidate at the same time, and you will lose all account funds.
FAQ
1. Reasons for the Change of Estimated Liquidation Price in the Cross Margin Mode
In order to give users a more intuitive sense of the risks in the Cross Margin mode, BingX provides users with an estimated liquidation price for reference. When the estimated liquidation price is reached, the margin rate will go to 0. All positions will be forced to close. However, the liquidation price is expected to change.
- When the user holds positions in multiple trading pairs, the price change of each trading pair will cause changes in the PnL of the order and the estimated liquidation price will change accordingly.
- When the user holds positions of a single trading pair, the charge of funding fees will affect the overall funds of the account. Therefore, the estimated liquidation price will change along with the settlement of funding fees.
- Any actions that can directly cause changes in account funds such as opening or closing positions will affect the estimated liquidation price.
2. Reasons for Forced Liquidation of Floating Profit in Cross Margin Mode
Please note that the margin rate is the only trigger factor for forced liquidation. When the margin rate is 0, forced liquidation will be triggered even being in a floating profit.
BingX allows users to use floating profit in advance, which may cause you to use the floating profit (such as transfer funds out or use the floating profit to open new positions) with former positions still opened and the account funds become negative followingly.
When closing positions, you need to compensate for the deficit. If the floating profit is less than the deficit, the forced liquidation will be triggered.
For example:
The user transfers 100 USDT to the Standard Futures account and opens a position. Now the NAV is 100 USDT, the position margin is 100 USDT, and the available margin is 0 USDT.When a floating profit of 150 USDT is generated, the NAV becomes 250 USDT; the position margin is 100 USDT; the available margin is 150 USDT. (The floating profit can be used). Then the user transfers out 150 USDT (part of the floating profit is used). When the market goes down, the floating profit decreases to 50 USDT. The user transfers in 100 USDT for trading, the current floating profit is 50 USDT, and 150 USDT is transferred out. Thus, Net Asset Value = 100 + 50 - 150 = 0 USDT. In this case, forced liquidation is triggered despite being in a floating profit.
It is recommended that users also observe other account indicators to identify risks.
- Margin Rate: Pay attention when the margin rate is close to 0.
- Net Asset Value: Pay attention when the net asset value is much smaller than the floating profit.
Note: BingX will be sending you forced liquidation notifications via SMS and Message Center. This function serves as a risk warning and does not guarantee timely delivery. You agree that during your use of the Service, under certain circumstances (including due to personal network congestion and poor network environment), users may be unable or delayed to receive SMS reminders.