Contract

Text

Under what circumstances will the perpetual contract be forced to close?

Forced liquidations occur when a trader's account margin becomes insufficient, funding payments are unmet, or when extreme market volatility disrupts the exchange's ability to find counterparties.

Oct 22, 2024 at 11:54 am

Understanding Perpetual Contract Forced Liquidations

1. Margin Exhaustion

When the available margin in a trader's account drops below the required margin for their open positions, a forced liquidation will occur. This happens because the exchange needs to protect itself from potential losses if the market moves against the trader's position.

2. Insufficient Funding

If a trader cannot meet the funding payments required for a perpetual contract, a forced liquidation may be initiated. Funding payments are necessary to maintain the fair value of the contract and ensure the market's stability.

3. Negative Account Balance

If a trader's total account balance becomes negative (i.e., they owe more money to the exchange than they have available), the exchange will liquidate their open positions to cover the deficit.

4. Market Volatility

Extreme market volatility can lead to forced liquidations if the price of the underlying asset moves too quickly against the trader's position. In such situations, the exchange may struggle to find counterparties to unwind the position, resulting in a forced liquidation.

5. System Malfunctions

Rarely, system malfunctions can trigger forced liquidations. These can occur due to technical glitches, network issues, or other unexpected errors that disrupt the exchange's operations.

6. Regulatory Intervention

Government agencies or exchanges may initiate forced liquidations in certain situations to protect investors or maintain market stability. This could happen in cases of suspected market manipulation or illegal activities.

7. Exchange Discretion

In certain circumstances, exchanges may use their discretion to force liquidate a trader's positions even if the conditions described above are not met. This is usually done to protect the exchange from potential risks or conflicts of interest.

Preventing Forced Liquidations

To avoid forced liquidations, traders should:

Maintain sufficient margin in their accounts
Monitor their positions and adjust accordingly
Manage their risk exposure by using stop-loss orders
Understand the implications of funding payments
Be aware of potential system malfunctions and regulatory interventions

Disclaimer:info@kdj.com

The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research！

If you believe that the content used on this website infringes your copyright, please contact us immediately (info@kdj.com) and we will delete it promptly.

Fear & Greed Index

Trade Now

Biggest Gainers

SHOGGOTH

$0.1192

144.64%

Trade Now
SHRUB

$0.1726

43.11%

Trade Now
BULL

$0.0841

42.25%

Trade Now
DEGEN

$0.0255

36.24%

Trade Now
MIGGLES

$0.0860

34.66%

Trade Now
MOODENG

$0.4170

29.73%

Trade Now

Latest Crypto News

Dogecoin Soars After President-Elect Donald Trump Announces the Creation of the Department of Government Efficiency (DOGE)
2024-11-15 08:15:02
Usual ($USUAL) Will Be the 61st Project on Binance Launchpool, Farming Starts on November 15
2024-11-15 08:15:02
Doge Coin's Ambitious Transformation Could Redefine the Crypto Landscape
2024-11-15 06:10:28
Solana, Kaspa, Toncoin, and JetBolt Position Themselves to Dominate the Next Crypto Bull Run
2024-11-15 06:35:59
DeFi Technologies Unveils CoreFi Strategy Corp to Offer Investors Exposure to Bitcoin-Focused Decentralized Finance
2024-11-15 06:35:59
The Disappointing Performance of ETH ETF: What's Behind it?
2024-11-15 04:10:01

Related knowledge

How to calculate Upbit contract rate

Nov 15,2024 at 04:47am

A Comprehensive Guide to Calculating Upbit Contract RatesUpbit, a leading South Korean cryptocurrency exchange, offers a comprehensive suite of trading options, including cryptocurrency spot trading, margin trading, and futures contracts trading. Futures contracts are financial instruments that allow traders to speculate on the future price of an asset,...

How long does it take for Upbit contract settlement

Nov 14,2024 at 10:10pm

How Long Does It Take for Upbit Contract Settlement?Upbit, a renowned South Korean cryptocurrency exchange, offers a diverse range of trading options, including spot trading and contract trading. Contract trading, also known as futures trading, allows traders to speculate on the future price movements of underlying assets without taking physical possess...

What is Upbit contract trading

Nov 14,2024 at 10:46pm

What is Upbit Contract Trading?Upbit is a South Korean cryptocurrency exchange that offers a wide range of trading options, including spot trading, margin trading, and contract trading. Contract trading, also known as futures trading, allows traders to speculate on the future price of a cryptocurrency without having to actually own the underlying asset....

What does Upbit contract trading mean

Nov 14,2024 at 10:22pm

What Does Upbit Contract Trading Mean?IntroductionUpbit, a leading South Korean cryptocurrency exchange, offers a range of trading options, including contract trading. Contract trading is a derivative instrument that allows traders to speculate on the price movements of underlying assets without owning them directly. This can provide opportunities for b...

How to read Upbit contract K-line

Nov 14,2024 at 02:44pm

How to Read Upbit Contract K-lineUpbit is a popular South Korean cryptocurrency exchange that offers a variety of trading options, including spot trading, margin trading, and contract trading. Contract trading is a type of futures trading that allows traders to speculate on the future price of a cryptocurrency without actually owning the underlying asse...

Tutorial on Upbit currency-based contracts

Nov 14,2024 at 06:30pm

Tutorial on Upbit Currency-Based ContractsUpbit is a well-known cryptocurrency exchange in South Korea that offers a variety of trading options, including currency-based contracts. These contracts are a type of derivative that allows traders to speculate on the price of an underlying asset, such as Bitcoin or Ethereum, without having to own the asset it...