Educational Post
What’s a forced liquidation?
In Margin trading, a forced liquidation is triggered when changes in the token price result in all your assets can only repay the principal and interest of the loan. All of the positions of this pair are closed automatically to prevent further loss and ensure you do not default on your loan.
In Futures trading, to keep positions open, traders are required to hold a percentage of the value of their position, i.e., the Maintenance Margin percentage. If a trader fails to fulfill the maintenance requirement, their position will be taken over by the liquidation engine and be liquidated, and the maintenance margin will be lost.
A forced liquidation brings realized loss, so traders should try to avoid forced liquidation.
