Perpetual Futures | Forced Liquidation Rules – BingX

1. What Is Forced Liquidation?

Forced liquidation occurs when market price fluctuations result in unrealized losses, reducing a trader's margin below the maintenance margin plus liquidation fees. To prevent the account balance from becoming negative, the system takes control and closes the position automatically.

2. What Are the Prerequisites of Forced Liquidation? What Is the Liquidation Process?

For BingX perpetual futures, liquidation is triggered based on the risk. When the risk of a futures position reaches or exceeds 100%, it will trigger either partial reduction or full liquidation.

1. Risk

Risk is an indicator evaluating the sufficiency of the collateral asset in a contract. A lower risk indicates that the collateral assets are sufficient and the position is more secure, while a higher risk indicates that the collateral assets may face shortage and the position is less secure. To avoid unexpected liquidations, it's crucial to monitor the risk of your position closely and stay informed through email, in-app messages, and SMS updates.

Isolated-Margin Mode Risk = (The maintenance margin of the isolated margin position + position closing fee) / (position margin + unrealized PnL)
Cross-Margin Mode Risk = (The combined maintenance margin of all cross-margin positions + position closing fees of all cross-margin positions) / (balance - all margins used in isolated-margin positions - frozen assets + all unrealized PnL of cross-margin positions)

Notes:

The maintenance margin and position closing fee for cross margin positions are calculated based on position data and the number of pending orders. Frozen assets refer to the margin and trading fees reserved for isolated margin pending orders and trading fees for cross margin pending orders.

-Maintenance margin represents the minimum margin that users must maintain to sustain their leveraged positions. It's calculated based on your positions (notional value) within the tiers. This calculation remains consistent within a given tier, regardless of the chosen leverage. The larger the position, the higher the maintenance margin rate.

- Forced liquidation trading fees are calculated based on the taker fee rate, determined by the user's current VIP level.

2. Liquidation Process

The liquidation process typically involves two scenarios (with examples at the end of this article):

2.1 Isolated Margin Mode

When the risk is ≥ 100% (i.e., the current collateral asset ≤ the maintenance margin required for isolated margin position + position closing fee) under isolated margin mode, forced liquidation will be triggered. The process is as follows:

The position will be frozen and the user will not be able to increase/reduce position margin, place orders, etc.
The system calculates a bankruptcy price and liquidates positions one by one based on this price.

2.2 Cross Margin Mode

When the risk is ≥ 100% (i.e., the current collateral assets ≤ the maintenance margin required for all cross margin positions + position closing fees) under cross margin mode, forced liquidation will be triggered. The process is as follows:

The corresponding margin account will be frozen and the user will not be able to deposit, withdraw, transfer, place orders, cancel orders, etc.
The forced liquidation process will stop if the risk is < 100% after canceling all pending orders under the margin account of the particular currency.
The forced liquidation process will stop if the risk is < 100% after long and short positions of the same currency under the margin account are closed to offset with each other at market price.
If the risk is still ≥100% after the executions of the above, the system will liquidate the cross margin positions one by one based on the bankruptcy price in the order of unrealized PnL (i.e., the position with the greatest loss will be liquidated first) until the risk is < 100% or all cross margin positions are liquidated.

3. Estimated Liquidation Price

The estimated liquidation price is the price at which the risk of a position equals 100% (only serves as a reference). The actual liquidation price is the price at which the risk reaches or exceeds 100%.

3.1 Isolated Margin Mode

3.1.1 Estimated Liquidation Price of the Same Position in Different Directions

In isolated margin mode, long and short positions for the same trading pair have different estimated liquidation prices based on the margin allocated to each position.

3.1.2 Reasons for Changes in Estimated Liquidation Prices

The user adjusts (increases or reduces) the margin for the open position.
The settlement of funding fees (including paying or collecting funding fees).

3.2 Cross Margin Mode

3.2.1 Estimated Liquidation Price of the Same Position in Different Directions

In the cross margin mode, long and short positions of the same pair are hedged and hence share the same estimated liquidation price.

3.2.2 Reasons for Changes in Estimated Liquidation Prices

Other positions experiencing changes in collateral due to unrealized PnL caused by price fluctuations.
Opening additional positions occupying account funds.
Transferring funds into or out of the account.
Deductions of trading fees incurred from opening and closing positions.
Settling of funding fees (including paying or collecting funding fees).

4. Bankruptcy Price

The bankruptcy price is the price at which the margin drops to zero. When the risk is ≥100%, the system will place an order at the bankruptcy price to liquidate the position. Since the whole process doesn't go through the matching system, the bankruptcy price will not be shown on the K-line and the bankruptcy price does not equal the actual liquidation price.

5. Insurance Fund

Insurance funds are used in the event of negative equity incurred from forced liquidation.

How it is sourced: When the system liquidates a user's position, it will take over that position at the bankruptcy price. If the execution price when the position is being processed is more favorable than the bankruptcy price, the surplus generated from the liquidation will be transferred to the insurance fund.
How it is used: When the system liquidates a position, it takes over at the bankruptcy price and processes the position on the market. If the execution price is less favorable or the position cannot be executed, the insurance fund steps in to cover any shortfall. When the insurance fund is insufficient or rapidly depleted, auto-deleveraging (ADL) will be triggered.

6.USDⓢ-M FuturesForced Liquidation Illustration

6.1 Liquidation Price Calculation in Isolated Margin Mode

For Long Positions (Buying):

Liquidation Price (Long) = Entry Price - [(Initial Margin − Maintenance Margin)/Position Size] - (Additional Margin/Position Size)

For Short Positions (Selling):

Liquidation Price (Short) = Entry Price + [(Initial Margin − Maintenance Margin)/Position Size] + (Additional Margin/Position Size)

Example:

Imagine a user with a 1,100 USDT account balance opening a long position of 10 ETH at a price of 1,000 USDT per ETH, using 10x leverage. The maintenance margin rate is 0.4%, the taker fee rate is 0.05%, and the maintenance amount is 0.

Initial Margin = Entry Price × Size / Leverage = 1,000 × 10 / 10 = 1,000

Maintenance Margin = Price × Size × Maintenance Margin Rate = 1000 × 10 × 0.004 = 40

Liquidation Price = 1,000 - [(1,000 - 40) / 10] - (0 / 10) = 904

6.2 Example of Forced Liquidation in Isolated Margin Mode

Imagine a user with a 1,100 USDT account balance opening a long position of 10 ETH at a price of 1,000 USDT per ETH, using 10x leverage. When the ETH price falls to 904 USDT, the user's position status is as follows (assuming a maintenance margin rate of 0.4% and a taker fee rate of 0.05%)

Initial Margin = Average Position Price × Size / Leverage = 1,000 × 10 / 10 = 1,000
Unrealized PnL = (Market Price - Average Position Price) × Size = (904 - 1,000) × 10 = -960
Risk = (The Maintenance Margin of the Isolated Margin Position + Position Closing Fee) / (Position Margin + Unrealized PnL) = (904 × 10 × 0.4% + 904 × 10 × 0.05%) / (1,000 - 960) = 101.70%

At this point, the risk is ≥100%, triggering the forced liquidation. The system will take over the user's position at the bankruptcy price of 900.4502251, resulting in the user's margin being depleted to zero.

Realized PnL = (Bankruptcy Price - Average Position Price) × Size = (900.4502251 - 1,000) × 10 = -995.4977489
Position closing fee = Bankruptcy price × size × trading fee rate = 900.4502251 × 10 × 0.05% = 4.502251126

After the system takes over the position, it will process the position in the market. If the position is processed for 902 USDT, a profit will be generated, and this profit will be added to the insurance fund. However, if the execution price is 900 USDT, a loss will occur, and the insurance fund will cover the loss.

Surplus = (Execution Price - Bankruptcy Price) × Size = (902 - 900.4502251) × 10 = 15.497749
Deficit = (Execution Price - Bankruptcy Price) × Size = (900 - 900.4502251) × 10 = -4.502251

6.3 Forced Liquidation in Cross Margin Mode Price Calculation

Liquidation Price Calculation in Cross Margin Mode

Assume a user has a 5,000 USDT account balance. They open a long position of 2 BTC at a price of 10,000 USDT/BTC with 10x leverage. The maintenance margin rate is 0.5%, and the maintenance amount is 0.

Maintenance Margin = Price × Position Size × Maintenance Margin Rate - Maintenance Amount

= 10000 × 2 × 0.5% - 0 = 100 USDT

Calculating the liquidation price begins with identifying the current sustainable loss.

Total Sustainable Loss = Available Balance - Maintenance Margin

= 5,000 - 100 = 4,900 USDT

If the total sustainable loss is 4,900 USDT, the position can withstand a price drop of 2,450 USDT (4,900 / 2). Therefore, the liquidation price for the position is 7,550 USDT (10,000 - 2,450).

6.4 Example of Forced Liquidation in Cross Margin Mode

Assume a user has a 5,000 USDT account balance. In cross margin mode, a long position of 2 BTC is opened with 10x leverage when the BTC/USDT price is 10,000 USDT and another long position of 10 ETH is opened with 10x leverage when the ETH/USDT price is 1,000 USDT. When the BTC price drops to 8,004 USDT, and ETH to 912 USDT, the user's position conditions at this time are as follows (assuming the maintenance margin rate is 0.4%, and the taker fee rate is 0.05%)

Balance = Deposits - Withdrawals + All Realized PnL + All Funding Fees - All Trading Fees = 5,000 - 0 + 0 + 0 - (10,000 × 2 × 0.05% + 1,000 × 10 × 0.05%) = 4,985
BTC Unrealized PnL = (Market Price - Average Position Price) × Position Size = (8,004 - 10,000) × 2 = -3,992
ETH Unrealized PnL = (Market Price - Average Position Price) × Position Size = (912 - 1,000) × 10 = -880
Position Risk Under Cross-Margin Mode = (Combined Maintenance Margin of All Cross-Margin Positions + Position Closing Fees of All Cross-Margin Positions) / (Balance - All Margins Used in Isolated-Margin Positions - Frozen Assets + All Unrealized PnL of Cross-Margin Positions) = [(8,004 × 2 × 0.4% + 912 × 10 × 0.4%) + (8,004 × 2 × 0.05% + 912 × 10 × 0.05%)] / (4,985 - 0 - 0 - 3,992 - 880) = 100.07%

At this point, the risk is ≥100%, triggering the forced liquidation. If the system detects no pending orders and no long and short positions of the same currency to close and offset with each other, the user's positions will be liquidated in the order of unrealized PnL (the position with the greatest loss will be liquidated first). The system will prioritize liquidating BTC positions based on the sorting rules. If the risk remains at or above 100% after closing all BTC positions, the system will proceed to liquidate ETH positions until the risk falls below 100% or all cross-margin positions have been liquidated.

7. Coin-M Standard Futures Forced Liquidation Illustration

7.1 Liquidation Price Calculation in Isolated Margin Mode

Imagine a user with a 1 ETH account balance opening a long position for 1,000 conts (contracts) at a price of 1,000 USDT per ETH, using 10x leverage. The maintenance margin rate is 0.4%, the taker fee rate is 0.05%, each contract's face value is 10 USDT, and the maintenance amount is 0.

Estimated Liquidation Price (Long) = [Long Position Value × (Maintenance Margin Rate + Taker Fee Rate + 1) − Maintenance Amount] / [Long Position Value × (1/Leverage +1) / Long Position Entry Price]

= [10000 × (0.004 + 0.0005 + 1) - 0] / [10000 × (1 / 10 + 1) / 1000]

= 913.181819 USDT

7.2 Example of Forced Liquidation in Isolated Margin Mode

Initial Margin = Position Value /Entry Price / Leverage

= 10000 / 1000 / 10

= 1 ETH

Unrealized PnL = (1/Long Position Entry Price -1 / Price) × No. of Contracts for the Long Position × Contract Face Value

= (1 / 1000 - 1 / 913.181819) × 1000 × 10

= -0.950722 ETH

Maintenance Margin = (No. of Contracts × Contract Face Value × Maintenance Margin Rate - Maintenance Amount) / Price

= (1000 × 10 × 0.004 - 0) / 913.181819

= 0.043803 ETH

Position Closing Fee = No. of Contracts × Contract Face Value / Price × Trading Fee Rate

= 1000 × 10 / 913.181819 × 0.05%

= 0.005476 ETH

Risk = (Maintenance Margin of the Isolated Margin Position + Position Closing Fee) / (Position Margin + Unrealized PnL)

= (0.043803 + 0.005476) / (1 - 0.950722)

= 100%

At this point, the risk is ≥100%, triggering the forced liquidation (The subsequent steps, including position takeover and insurance fund injection, follow the same procedures as those for USDⓢ-M futures).

7.3 Forced Liquidation in Cross Margin Mode Price Calculation

Imagine a user with a 2 ETH account balance opening a long position for 1,000 conts (contracts) at a price of 1,000 USDT per ETH, using 10x leverage. The maintenance margin rate is 0.4%, the taker fee rate is 0.05%, each contract's face value is 10 USDT, and the maintenance amount is 0.

Position Opening Fee = No. of Contracts × Contract Face Value / Price × Trading Fee Rate

= 1000 × 10 / 1000 × 0.05%

= 0.005 ETH

Estimated Liquidation Price in Cross Margin Mode (Long) = No. of Contracts for the Long Position × Contract Face Value × (Long Maintenance Margin Rate + Taker Fee Rate + 1) − Long Maintenance Amount] / [Account Balance + Contract Face Value × (No. of Contracts for the Long Position / Long Position Entry Price)]

= [1000 × 10 × (0.004 + 0.0005 + 1) - 0] / [1.995 + 10 × (1000 / 1000)]

= 10045 / 12

= 837.432264 USDT

7.4 Example of Forced Liquidation in Cross Margin Mode

Unrealized PnL = (1/Long Position Entry Price -1 / Price) × No. of Contracts for the Long Position × Contract Face Value

= (1 / 1000 - 1 / 837.432264) × 1000 × 10

= -1.941265 ETH

Position Closing Fee = No. of Contracts × Contract Face Value / Price × Trading Fee Rate

= 1000 × 10 / 837.432264 × 0.05%

= 0.005971 ETH

Maintenance Margin = (No. of Contracts × Contract Face Value × Maintenance Margin Rate - Maintenance Amount) / Price

= (1000 × 10 × 0.004 - 0) / 837.432264

= 0.047766 ETH

Cross-Margin Position Risk = (Maintenance Margin of Cross-Margin Positions + Closing Fee of Cross-Margin Positions) / (Account Balance + Unrealized PnL of All Cross Margin Positions)

= (0.047766 + 0.005971) / (1.995 - 1.941265)

= 100%

At this point, the risk is ≥100%, triggering the forced liquidation.

For more information, please read:

Perpetual Futures | Hedge Mode

Perpetual Futures | BingX Margin Trading Terms

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