To help you better understand and manage the risks of contract trading, this article explains the liquidation price, bankruptcy price, and the trigger conditions and handling procedures for contract liquidation. These concepts are closely related to margin management.
What Is the Liquidation Price?
The liquidation price is the price at which liquidation may be triggered when the mark price reaches a specific level. When the mark price of a contract reaches the corresponding level, the system will handle the relevant position according to the liquidation rules to control further risks.
The logic for determining whether liquidation is triggered is:
Actual margin ratio at a given price ≤ Maintenance margin ratio under the current tier
What Is the Bankruptcy Price?
The bankruptcy price is the price level corresponding to the point at which the margin of a position is insufficient to cover further losses and related fees. The bankruptcy price is related to risk management after liquidation and is not the price that triggers liquidation.
What Is the Difference Between the Liquidation Price and the Bankruptcy Price?
Comparison Item | Liquidation Price | Bankruptcy Price |
What it represents | The price corresponding to the point at which a position meets the liquidation conditions | The price level corresponding to the point at which the margin of a position is depleted |
Main purpose | Determining when liquidation is triggered | Understanding risk management after liquidation |
Is it the liquidation trigger price? | Yes | No |
Is it the same as the actual execution price? | Not necessarily | Not necessarily |
Under What Circumstances Is Liquidation Triggered?
Contract trading requires margin to maintain a position. When the market price fluctuates sharply and the margin status of a position can no longer meet the maintenance margin requirements under the current tier, the system will trigger liquidation.
Astral uses the mark price as the basis for determining liquidation. The mark price may differ from the latest market transaction price. Therefore, when assessing position risks, pay attention to the mark price and margin status.
What Happens After Liquidation Is Triggered?
Liquidation means that the system forcibly closes the relevant position in accordance with the contract rules. For a long position, closing the position requires selling; for a short position, closing the position requires buying. Market prices and liquidity will affect the actual execution results. During liquidation, the trading platform automatically sells the trader's long position or buys the trader's short position to close the trader's position. The liquidation price is usually calculated according to the trading platform's rules or the market index price.
Two Common Methods for Calculating the Liquidation Price
The liquidation price is usually calculated according to the trading platform's rules or the market index price. The specific calculation method may vary between trading platforms. The following are two common calculation methods:
1. Liquidation price calculation method based on the mark price: The mark price is a specific price index used by the trading platform to reflect the overall price trend of the digital asset market. When a trader's maintenance margin ratio falls below a certain threshold, the trading platform switches the valuation of the trader's position to a mark-price-based model and then calculates the liquidation price. The liquidation price is usually a certain proportion of the mark price, with the specific proportion varying according to the trading platform's rules.
2. Liquidation price calculation method based on the contract index price: The contract index price is a price index calculated by the trading platform based on real-time trading prices from multiple digital asset exchanges. When a trader's maintenance margin ratio falls below a certain threshold, the trading platform calculates the liquidation price based on the contract index price and the liquidation price spread. The liquidation price spread is one of the basic parameters specified by the trading platform for digital asset contract trading.
How Can Liquidation Risks Be Managed?
Before engaging in contract trading, understand the applicable margin requirements and liquidation rules, and manage your positions according to your risk tolerance. During the holding period, pay attention to the mark price, margin status, and risk information displayed on the trading page. During market volatility, promptly assess whether it is necessary to adjust your position or margin.
Disclaimer
This article is provided for product explanations and educational reference only. It does not constitute investment, trading, financial, or legal advice, nor does it constitute an offer to buy or sell any digital asset. The examples in this article are for illustrative purposes only and do not include factors such as transaction fees and funding fees. Actual results may differ.
Product features, trading rules, fees, and page information may be adjusted. If this article is inconsistent with the latest announcement from AstralX or the information displayed on the trading page, the applicable latest rules and the actual page information shall prevail.
Digital asset contract trading involves significant risk. Leverage amplifies the impact of price fluctuations on margin, and you may lose all of your deposited margin. Before trading, fully understand the product rules and make prudent decisions based on your financial circumstances and risk tolerance.