Glossary / Glossary term
Liquidation
Liquidation is the forced closing of positions when equity falls to the maintenance margin; in a challenge, the loss floors normally come first.
On an exchange, a leveraged position is liquidated when equity falls to the maintenance margin: the exchange closes it to stop the loss growing past the collateral.
Here
The simulation keeps the same safety net, with cross margin across all positions: if equity reaches the maintenance margin of the open positions, every order is cancelled and every position is closed.
With the leverage caps and loss limits of the published rules, the loss floors sit far above that level, so a breach stops the account long before liquidation would. The floor, not the liquidation price, is the number to plan for; the order preview shows the mark price at which today's floor would break.
Related
- LeverageLeverage is the position value divided by the margin it uses; a cap limits how large a position can be for the equity in the account.
- BreachA breach is the moment equity falls below the daily loss floor or the max loss floor; the account stops and its positions are closed.
- Perpetual futures in a prop challenge: leverage, funding and liquidationHow perpetual futures work in a simulated prop account: mark price, margin and leverage caps, funding, fees, and why a breach comes before liquidation.