Liquidation mechanism

1. What is liquidation

2. Estimated liquidation price (Est. Liq. Price)

• Isolated Margin Ratio = (Maintenance Margin for Isolated Position) / (Isolated Position Margin + Unrealized P&L for Isolated Position)
• Cross Margin Ratio = (Total Maintenance Margin of All Cross Positions) / (Account Balance − Total Isolated Margin + Unrealized P&L of All Cross Positions)

• The total maintenance margin in Cross Mode is calculated based on position size and open orders.
• Maintenance margin represents the minimum margin required to sustain a leveraged position. It increases proportionally with position size.
• No trading fees are charged during the liquidation process.

3. Liquidation process

• The position will be frozen, and users will not be able to adjust the position, place new orders, or perform any other operations.
• The system will liquidate the isolated position based on the calculated bankruptcy price.

• The corresponding margin account will be frozen. Users cannot deposit, withdraw, transfer, or place/cancel orders.
• All open orders are canceled. If the margin ratio drops below 100%, liquidation stops.
• Long and short positions of the same contract under the account will be internally matched at the current market price. If the margin ratio drops below 100%, liquidation stops.
• If the margin ratio remains at or above 100% after the above operation, the system will liquidate positions one by one based on the bankruptcy price, starting from those with the smallest unrealized P&L, until the margin ratio drops below 100% or all positions have been liquidated.

• Market price fluctuations affect unrealized P&L and margin balance.
• Opening new positions or adjusting existing ones will use part of the account balance.
• Deposits or withdrawals to/from the account will affect the total assets.
• Trading fees incurred when opening or closing positions.
• Funding fee settlements, including funding payments.

• Cross Margin Mode: All USDT-margined contracts share the same margin balance. When the margin ratio hits 100%, liquidation occurs across all positions, even if their estimated liquidation prices differ.
• Isolated margin mode: Each position's margin is calculated independently. Only the position whose margin ratio reaches 100% will be liquidated; others remain unaffected.
• To reduce unnecessary liquidation, USDT-margined contracts use the mark price as an additional reference. When the system evaluates whether to trigger a liquidation, the maintenance margin ratio must be at or above 100%. Using the mark price helps minimize the risk of a cascade of liquidations caused by abnormal trade prices.

4. Bankruptcy price

5. Insurance fund

• If liquidation is executed at a better price than the bankruptcy price, the remaining margin is added to the insurance fund.
• If the market price falls below the bankruptcy price or a position cannot be liquidated, the insurance fund will cover the resulting loss. If the insurance fund is insufficient or quickly depleted, the Auto-Deleveraging (ADL) mechanism is triggered, reducing opposing profitable positions in sequence to offset the losses.

• If the market rebounds and the position is closed at 10,010 USDT, no deficit occurs — the remaining 10 USDT will be transferred to the insurance fund.
• If the market continues to drop and the position is closed at 9,000 USDT, a shortfall of 1,000 USDT occurs. The insurance fund will cover the deficit.

6. Examples of liquidation calculations

6.1 Isolated margin mode

• Isolated Margin Ratio = Maintenance Margin ÷ (Position Margin + Unrealized P&L)
• Maintenance Margin = Entry Price × Quantity × Maintenance Margin Rate
• Position Margin = Entry Price × Quantity ÷ Leverage
• Unrealized P&L (long) = (Mark Price − Entry Price) × Quantity

6.2 Example:

• Maintenance Margin = 4000 × 10 × 1% = 400 USDT
• Position Margin = 4,000 × 10 ÷ 50 = 800 USDT
• Unrealized P&L = (3,962 - 4,000) × 10 = -380 USDT

• Unrealized P&L = (3,955 - 4000) × 10 = -450 USDT
• Isolated Margin Ratio = 400 ÷ (800 - 450) × 100% = 114.29%

6.3 Cross margin mode

• Cross Margin Ratio = Σ Maintenance Margin ÷ (Account Balance − Σ Isolated Margin + Σ Unrealized P&L)
• Σ Maintenance Margin = Σ (Entry Price × Quantity × Maintenance Margin Rate)
• Unrealized P&L (long) = (Mark Price − Entry Price) × Quantity

6.4 Single position example

• Maintenance Margin = 4,000 × 10 × 1% = 400 USDT
• Unrealized P&L = (3,950 - 4,000) × 10 = -500 USDT
• Margin Ratio = 400 ÷ (1,100 - 500) × 100% = 66.67%

• Unrealized P&L = (3,930 - 4,000) × 10 = -700 USDT
• Margin Ratio = 400 ÷ (1100 - 700) × 100% = 100%

6.5 Multiple positions example

• ETH/USDT: Entry 4,000 USDT, 5 ETH, 100× leverage, 1% maintenance margin
• BTC/USDT: Entry 113,000 USDT, 0.02 BTC, 50× leverage, 1% maintenance margin

• ETH: 4,000 × 5 × 1% = 200 USDT
• BTC: 11,3000 × 0.02 × 1% = 22.6 USDT
• Σ Maintenance Margin = 222.6 USDT

• If BTC price stays at 113,000 USDT, ETH would trigger liquidation around 3,825 USDT
• If ETH price stays at 4,000 USDT, BTC would trigger liquidation around 69,130 USDT
• If both drop simultaneously, liquidation occurs once the total unrealized P&L pushes the margin ratio ≥ 100%

Notes:

1. Risk margin details can be found under Contract Information.
2. The estimated liquidation price in cross mode may change dynamically with unrealized P&L.
3. Minor calculation discrepancies may occur due to rounding.
4. Displayed values may differ slightly from backend calculations.
5. Toobit reserves the right of final interpretation for this product.