W contracts offer high leverage, and in order to maintain positions, your position margin must be greater than the minimum maintenance margin required by the contract.
1. If you are unable to meet the margin requirements:
Isolated Margin Mode: Your contract position will force the position to be closed and the position margin of your investment will be lost.
Cross Margin Mode: When the position margin is insufficient to maintain the margin, the system will automatically add the margin from the contract account balance to the position margin until the available balance is zero, and the position is forced to close.
2. What is "Liquidation Price"？
The contract provides operations in both "long" and "short" directions.
Going Long: In the future, if prices rise, you will be profitable and if prices fall, you will lose money.
If you hold a long position, when the "Fair Price" of the contract is lower than the "Liquidation Price" of the position, you will be forced to close the position.
Going Short: In the future, if prices fall, you will be profitable and if prices rise, you will lose money.
If you hold a short position, you will be forced to close the position when the “Fair Price” of the contract is higher than the “Liquidation Price” of the position.
You can adjust the “Liquidation Price” by “Leverage Adjustment” and “Position Mode Adjustment”.
Under the Isolated Margin Mode, you can adjust the “Liquidation Price” by “adding/reducing position margin”.
For the specific operation and impact of “Leverage Adjustment”, “Position Mode Adjustment” and “adding/reducing position margin”, please pay attention to our previous issue of “Contract Live: Maintenance Margin”~
3. "Fair Price" as much as possible to reduce the occurrence of forced liquidation
BW uses the “Fair Price Marking Method” to avoid forced liquidation due to a lack of liquidity or market manipulation.
Take BTC_USDT perpetual contract as an example:
Index price: Take the current price of the top 3 exchanges in the spot market and take a weighted average, which is very close to the spot price.
Fair price: The marked price is equivalent to the index price + a decaying Funding basis rate.
The fair price is close to the spot index price which is not easily manipulated by participants in the contract market.
Everyone is playing contract trading, and the most worrying thing is that the contract market is maliciously manipulated and the position is forced to be liquidation.
On the BW exchange, whether the “Fair Price” is lower than the “Liquidation Price” (long positions) or higher than the “Liquidation Price” (short position) is used to determine whether the user's contract position is forcibly closed.
The contract market was maliciously manipulated, which only affected the real-time contract price of the contract, that is, the contract market.
But "Forced Liquidation" is judged by the "Fair Price" close to the spot index.
The “Fair Price” mechanism minimises the occurrence of forced liquidation events caused by malicious manipulation of contract conditions.
If the liquidation is triggered, BW will cancel all unfilled orders for the contract to release the margin and maintain the position.
If the maintenance margin requirement is not met at this time, the position is taken over by the bankruptcy price.
5. BW platform forced liquidation warning and notice
1). BW will notify investors of the forced liquidation warning and forced liquidation information through “sms and email”.
2). When the user's position triggers the forced liquidation warning line, the system will send the warning message to the investor by SMS and email at 10 minutes/time to remind investors to pay attention to risk control.
3). Examples of email notifications:
4). Examples of SMS notifications:
[BW] Dear user, your position in the direction of * * contract * * is close to the forced liquidation price. Please adjust the trading strategy in time to avoid forced liquidation.
6. How to check "Forced Liquidation" orders, and fulfilled orders
“Force Liquidation” orders can be viewed in your “Order History” and “My Trades”.
There will be "Forced liquidation" logo on "Forced liquidation" orders.
If you do not see an order or a transaction with a "Forced liquidation" entrusted logo, you have not been forced to close the position.
7. Summary of Forced Liquidation
1). Isolated Margin Mode: if your position margin is insufficient to maintain the margin, your position will be forced to close.
2). Cross Margin Mode: if your position margin is insufficient to maintain the margin, the margin will be automatically added from your contract account until the available balance is zero, and the position is forced to close.
3). Judging whether it is forced by “liquidation price” and “fair price”.
4). You can adjust the leverage and the position mode to control the “liquidation price”. Under the isolated margin mode, you can add/reduce the position margin to adjust the “liquidation price”.
5). The “fair price” mechanism minimises the occurrence of forced liquidation.