Your position enters Liquidation when the Mushino Mark Price reaches the Liquidation Price of your position.
Your position entering Liquidation doesn't necessarily mean that you lose your entire margin, and it doesn't necessarily mean that you have to open a new position.
In the vast majority of Liquidations, the involved positions eventually return to normal. When a Liquidated position returns to normal, you get to keep your position margin, and can submit new orders on the position again - just as if the position had never entered Liquidation.
The Liquidation engine will attempt to close out 10 percent of your position (or 10,000 USD, whichever is higher). If this is sufficient to bring your position above the Minimum Maintenance Margin requirements (which it usually is), the position will exit Liquidation.
If the Minimum Maintenace Margin requirement is still not satisfied, the Liquidation engine will close out yet another 10 percent of your position (or 10,000 USD, whichever is higher). The Liquidation engine will keep doing so until one of the following happens:
- The margin requirements are satisfied.
- Your position is out of margin or has gone bankrupt.
In case your position is fully closed out, all of the margin remaining on your position will be credited to your cash balance (plus any changes in profit or loss incurred from having your Liquidation orders filled in the market).
This is in contrast to a number of other platforms, where you will always lose your entire maintenance margin upon having your position liquidated, or having it enter Liquidation.
Note: Incremental Liquidation is not available for positions that are below 10,000 USD in size. Positions below 10,000 USD in size will be closed out in full.
What happens if Liquidation fails?
A Liquidation fails when the following two things happen simultaneously:
- The price keeps moving against you
- The Liquidation orders submitted on your behalf cannot be filled in the market
Since your position is closed out in small batches, 2) should not happen very often. If it does happen (and the price keeps moving against you), your position is taken over by a liquidity provider, and you are notified by email. Your Cash Balance will stay the same, and you are free to open a new position.
Is the process transparent?
The Liquidation process is fully transparent. Every time the Liquidation engine submits an order, you are notified in real time. You can then check the quantity and price of the order in your order history.
Are there any restrictions while my position is in Liquidation?
While Liquidation is going on, there are a few restrictions in place. You cannot place new orders on the trading pair of your Liquidated position, and you cannot cancel orders submitted by the Liquidation engine. The purpose of this is to allow the Liquidation engine to do its work undisturbed, so that your position can return to normal as quickly as possible.
Are there any restrictions after the position has exited Liquidation?
You will not be able to submit new orders on the position for 5 minutes. After the 5 minutes are gone, you will be able to submit new orders once again.
Other than that, there are no restrictions.
When does a position enter Liquidation?
A position enters Liquidation when the Mark Price reaches the Liquidation Price of your position. At this point, your position will no longer be able to satisfy the Minimum Maintenance Margin requirements for the trading pair.
How can I avoid Liquidation?
You can avoid Liquidation by submitting a Stop Market order with a Stop price just above the Liquidation Price (if you are Long) or just below the Liquidation Price (if you are Short).
The Mushino trading interface makes it very easy to do so.
Simply edit your position and type in your desired Stop Price. Then save your changes. A Stop Market order will automatically be submitted on your behalf. As long as there is sufficient liquidity to get the Stop Market order filled, you will avoid Liquidation.
Help, my position has entered Liquidation. Can I do something?
Yes! Simply deposit additional margin by dragging the leverage slider left. If the additional margin is sufficient to cover Minimum Maintenance Margin requirements, your position will exit Liquidation immediately.