A Perpetual Contract position is liquidated (forcibly closed by the system) when its Maintenance Margin Ratio falls to 100% or below. For an isolated position, only that position is closed. For a cross margin account, the whole contract account is measured. The system then places a limit order at the bankruptcy price, which is the theoretical price at which margin reaches zero. To calculate the liquidation price before it happens, see How to Calculate the Liquidation Price of a Perpetual Contract.

Key terms

• - Maintenance Margin Ratio: the measure the system uses to track how much margin a position has left compared with the minimum it must keep. Liquidation is triggered at 100% or below.
• - Maintenance Margin (MM): the minimum margin a position must keep.
• - Isolated margin mode: each position is calculated separately, with its own margin.
• - Cross margin mode: all cross positions share the total equity of the contract account.
• - Mark price: the price the system uses to measure the Maintenance Margin Ratio.
• - Bankruptcy price: the price at which a position’s margin would reach zero.
• - Taker fee rate: the fee rate charged when an order removes liquidity from the market.
•  

When liquidation is triggered

• - Isolated margin: when the Maintenance Margin Ratio of a single position reaches 100%, the system liquidates that position only. Other positions and account balances are not affected.
• - Cross margin: when the cross margin equity falls to the sum of the Maintenance Margin for all cross positions plus the Estimated Closing Fees, the Maintenance Margin Ratio reaches 100% and liquidation is triggered.
•  

How the liquidation process works

1. 1. The system monitors the Maintenance Margin Ratio of each position or account, using the mark price.
2. 2. When the Maintenance Margin Ratio reaches 100%, the system immediately starts a liquidation order.
3. 3. The liquidation order is placed as a limit order at the bankruptcy price. The order seeks execution at a price equal to or better than the bankruptcy price.
4. 4. The actual execution price and time can be affected by market liquidity and price volatility. The final trade record applies.
5.  

Bankruptcy price formulas

Long position:

Bankruptcy Price = (Average Entry Price × Qty × Contract Value − Position Margin) ÷ [Qty × Contract Value × (1 − Taker Fee Rate)]

Short position:

Bankruptcy Price = (Average Entry Price × Qty × Contract Value + Position Margin) ÷ [Qty × Contract Value × (1 + Taker Fee Rate)]

Where Qty is the position quantity, Contract Value is the amount of the underlying asset in one contract, and Position Margin is the margin held by the position.

Worked example: long position liquidated by a price decline

Inputs: gold at 3,300 USD, buy long 1 lot, 10x leverage, taker fee rate 0.05%, maintenance margin rate 0.5%.

5.  1. Initial margin: 3,300 × (1/10 + 0.05%) = 331.65 USD.
6. 2. Liquidation threshold: maintenance margin is 3,300 × 0.5% = 16.50 USD. Add an estimated closing fee of 1.49 USD. The total minimum requirement is 17.99 USD.
7. 3. Price decline erodes margin: the price drops from 3,300 to 2,986.34 USD. The cumulative unrealized loss is 313.66 USD. The remaining margin falls to 17.99 USD, which hits the threshold. The system immediately starts a liquidation order.
8. 4. Liquidation order price: the system places a limit order at the bankruptcy price of 2,969.84 USD, seeking execution at a price better than that price.
9.  

Worked example: short position liquidated by a price increase

Inputs: gold at 3,300 USD, sell short 1 lot, 10x leverage, taker fee rate 0.05%, maintenance margin rate 0.5%.

9. 1. Initial margin: 3,300 × [(1/10) × (1 + 0.05%) + 0.05% × (1 − 0.5%)] = 331.81 USD.
10. 2. Liquidation threshold: maintenance margin is 3,300 × 0.5% = 16.50 USD. Add an estimated closing fee of 1.81 USD. The total minimum requirement is 18.31 USD.
11. 3. Price increase erodes margin: the price rises from 3,300 to 3,613.50 USD. The cumulative unrealized loss is 313.50 USD. The remaining margin falls to 18.31 USD, which hits the threshold. The system immediately starts a liquidation order.
12. 4. Liquidation order price: the system places a limit order at the bankruptcy price of 3,630.00 USD, seeking execution at a price better than that price.
13.  

How to reduce the risk of liquidation

• Keep enough margin in the account, and add margin (top up) early when needed.
• Set stop-loss orders to close a position before losses grow.
• Use lower leverage to increase the distance between the liquidation price and the current price.
• Monitor the funding rate, because holding costs can reduce margin over time.

For questions about a liquidation, submit the Vantage trade investigation form. The trading team will follow up.