This article summarizes common questions about liquidation (forced liquidation) in Perpetual Futures to help you better understand how liquidation works and how to manage risk.
This content is for educational purposes only and does not constitute investment advice.
Q1: Why was my position liquidated even though the candlestick (K-line) didn’t touch my liquidation price
Liquidation is triggered based on the Mark Price, not the price shown on the candlestick chart in most cases.
- K-line / Chart price usually reflects the Last Price (latest traded price).
- Liquidation checks typically use the Mark Price, which is designed to be more stable and less vulnerable to short-term price spikes.
So, even if the Last Price on the chart did not reach your liquidation price, your position can still be liquidated if the Mark Price reaches the liquidation trigger.
Q2: Under what conditions will I be liquidated?
A position may be liquidated when your account no longer has sufficient margin to maintain it. In general, liquidation happens when losses cause your margin ratio to fall below the maintenance margin requirement, and your remaining margin is insufficient to keep the position open.
Higher leverage and lower margin make liquidation more likely because small price moves can consume your available margin quickly.
Q3: What’s the difference between liquidation in Isolated Margin and Cross Margin?
Isolated Margin
- Only the margin assigned to that position is used to support it.
- If liquidation occurs, the maximum loss is generally limited to the isolated margin allocated to that position (plus fees).
Best for: limiting risk to a single position.
Cross Margin
- Positions share the account’s available margin (eligible collateral) to reduce liquidation risk.
- It can better withstand short-term volatility, but if liquidation occurs, it may affect more of your account balance, and in some cases multiple positions.
Best for: traders who actively manage risk and want margin efficiency.
Q4: How much will I lose if I get liquidated?
Typically, your maximum loss is the margin you committed to that position (and associated fees).
In extreme market conditions, if negative balance (shortfall) occurs after liquidation (sometimes called “socialized loss” risk on some platforms), it is generally handled via mechanisms such as an insurance fund and other risk controls.
Note: Specific coverage depends on Echobit’s risk control rules and market conditions.
Q5: How can I reduce the risk of liquidation?
Common risk-management actions include:
- Use lower leverage
- Add margin (increase collateral) when risk is rising
- Reduce position size (partial close)
- Place stop-loss orders and avoid relying solely on liquidation as a “stop”
- Keep extra available balance, especially in cross margin, to absorb volatility
-
Monitor Mark Price, funding fees, and margin ratio indicators
Q6: Why are my TP/SL orders automatically canceled, or why does my TP/SL order size decrease?
If the total quantity of your TP/SL (take-profit/stop-loss) orders exceeds your current position size, the system may automatically adjust them to ensure that the total executable quantity does not exceed the position size.
Typically:
- Orders may be sorted by price (based on distance to the current price), and some orders may have their quantities reduced.
- If an order’s adjusted quantity becomes 0, it will be canceled automatically.
Example
You hold 9 DOT and the current DOT price is 5 USDT. You place three stop-loss orders:
- SL Order 1: stop price 2 USDT, quantity 5 DOT
- SL Order 2: stop price 3 USDT, quantity 5 DOT
- SL Order 3: stop price 4 USDT, quantity 5 DOT
Total SL quantity = 15 DOT, but position size = 9 DOT.
The system must reduce total SL quantity by 15 − 9 = 6 DOT.
Following the adjustment logic (price-distance sorting), the system may:
- Cancel SL Order 1 (reduced to 0),
- Reduce SL Order 2 by 1 DOT,
- Leave SL Order 3 unchanged,
until the total TP/SL quantity matches the position size.
Q7: In Cross Margin, why does my available balance still show 0 after I transfer in more funds?
In cross margin, when your position has unrealized losses and available margin is 0, any newly transferred funds may be used first to cover unrealized losses and stabilize margin risk. As a result, your available margin can remain 0 until the unrealized loss is sufficiently covered.
Q8: In Cross Margin, why did my unrealized profit “disappear” after I used it to open another position?
In cross margin, unrealized PnL is reflected in available margin.
If you use that available margin (including floating profit) to open another position, that floating profit is effectively being used as margin for the new position. If the new position loses money, it can reduce the floating profit you previously saw.
Example
- Available margin: 100 USDT
- BTC = 50,000, open a BTC long with 10×, margin used 100 USDT.
- BTC rises to 55,000, unrealized profit becomes 100 USDT, added into available margin.
- You use this 100 USDT to open an ETH long (cross margin) at 2,000 with 10×, margin used 100 USDT.
- BTC stays flat, but ETH drops, causing an ETH loss of 90 USDT.
- Your previously visible BTC floating profit is now effectively reduced; final realized profit from BTC may appear to be only 10 USDT when closed.
Q9: Why can I be liquidated in Cross Margin even if one of my positions is profitable?
In cross margin, all cross positions share the same pool of eligible collateral. If the combined account condition falls below the required threshold, multiple positions can be liquidated together, even if some are in profit.
In general, liquidation may occur when:$$\text{Eligible Collateral}+\text{Total Unrealized PnL} \le \text{Total Maintenance Margin}+\text{Estimated Close Fees}$$
Q10: Additional Notes You Should Know
- Mark Price vs. Last Price: Mark Price is commonly used for liquidation and unrealized PnL to reduce liquidation caused by price manipulation or short spikes.
- Funding fees and trading fees: These costs can reduce margin over time and may increase liquidation risk.
- Stop-loss is not guaranteed: In fast markets, slippage or gaps can cause stop orders to execute at worse prices than expected.
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Cryptocurrency investments are subject to high market risk and price volatility. You should only invest in products that you are familiar with and fully understand the associated risks.
Before making any investment decisions, please carefully assess your investment experience, financial situation, investment objectives, and risk tolerance, and consider seeking advice from an independent financial advisor.
The information provided in this document is for informational purposes only and should not be considered financial, investment, or trading advice. Past performance is not indicative of future results. The value of your investments may fluctuate, and you may lose part or all of your invested capital.
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