To help you better understand the risks of futures trading and manage your margin and positions effectively, this article explains how liquidation works under cross margin and isolated margin modes on Toobit.
What is liquidation?
When trading futures on Toobit, liquidation is an automatic risk management mechanism. When the margin ratio of an account or position reaches the 100% liquidation threshold, the system triggers the liquidation process and takes appropriate risk management measures based on the account's margin mode and overall risk level.
Toobit uses the mark price to calculate unrealized P&L and margin ratios, which are used to determine whether liquidation should be triggered.
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Cross margin: Liquidation is triggered when the account margin ratio reaches 100%.
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Isolated margin: Liquidation is triggered when the position margin ratio reaches 100%.
For details on margin ratio calculations, estimated liquidation prices, and liquidation rules, see Liquidation mechanism.
How does liquidation work?
Once liquidation is triggered, the system takes appropriate risk management measures based on the account's margin mode and overall risk level. These measures may include canceling relevant open orders, partially reducing positions, or closing positions.
For positions in higher risk limit tiers, the system may reduce the position size or adjust the risk limit tier to reduce the position's risk exposure.
If the account or position returns to the required margin level after these measures are taken, the system will stop further risk management actions and maintain the remaining position. If the risk remains above the required level, the system may continue taking appropriate risk management measures.
Cross margin | Liquidation
Under cross margin, positions share the available margin in the account. Changes in account balance, unrealized P&L, open orders, and margin usage can all affect the account's margin ratio.
When the account margin ratio reaches 100%, the system initiates the liquidation process and may cancel orders, reduce positions, or close positions based on the account's overall risk level.
If you hold both a long and a short position for the same futures under hedge mode, the system will manage the positions according to the applicable risk management rules to reduce the account's overall risk.
If multiple positions are held under cross margin, the system will take appropriate risk management measures based on the account's overall risk level. Once the account margin ratio falls below the liquidation threshold, the system will stop further risk management actions.
Isolated margin | Liquidation
Under isolated margin, each position has its own dedicated margin, so the risk of one position is largely isolated from other positions. When a change in the mark price causes a position's margin ratio to reach 100%, the system initiates the liquidation process for that position.
Under hedge mode, if you hold both a long and a short position for the same futures, the system will manage the positions according to the applicable risk management rules.
Depending on the position's risk level, the system may cancel relevant open orders, partially reduce the position, or close the position to control risk.
If auto margin addition is enabled, the system will attempt to add margin to the position according to the applicable rules. If the position remains below the required margin level after additional margin is added, the system may continue with risk management measures such as partial position reduction or liquidation.
For more information, please refer to Perpetual futures | Guide to auto margin addition (Isolated margin).
Why does the estimated liquidation price change?
1. The estimated liquidation price is calculated in real time based on the current account and position data, so it is not fixed.
2. Changes in margin balance, position size, open orders, funding fees, trading fees, and risk limit tiers may cause the estimated liquidation price to change.
3. Under cross margin, the unrealized P&L of other cross-margin positions and changes in account balance may also affect the estimated liquidation price displayed for an individual position.
Therefore, the estimated liquidation price is for reference only. Whether liquidation is actually triggered is determined by the mark price and the margin ratio calculated by the system in real time.
How can you reduce the risk of liquidation?
1. Add margin
Adding margin increases the amount of price movement your account or position can withstand, which can help reduce liquidation risk.
Under cross margin, you can transfer additional funds to your Futures Account. Under isolated margin, you can add margin to a specific position or enable auto margin addition.
2. Reduce leverage
Higher leverage increases your exposure to price movements and can bring your position closer to liquidation. You can reduce leverage by adding margin or reducing your position size, which helps lower your liquidation risk.
3. Reduce or close your position early
If your account or position is approaching the liquidation threshold, consider reducing your position size to lower your risk. If you no longer want to hold the position, you can close it before liquidation is triggered.
During periods of high volatility or low liquidity, execution prices may differ from expected prices due to market movements and slippage.
Risk warning
Futures trading carries significant risk. Leverage can magnify both gains and losses, and extreme market conditions may result in the loss of some or all of your margin.
Make sure you understand liquidation, maintenance margin, risk limits, and auto margin addition before trading. Choose leverage and position sizes that match your risk tolerance, and manage your risk carefully.
This article is for informational purposes only and does not constitute investment, financial, legal, or tax advice. For the latest rules and information, please refer to Toobit's official announcements, trading rules, and the information displayed on the platform.
