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Liquidation is the process the protocol uses to forcibly close positions that are at risk of not being able to cover losses. Every open position has a (your collateral allocated to that position, plus or minus ). As the oracle price moves, your position margin changes in real time and so does your position’s health status. The for a position equals ½ of the initial margin that would be required to open the same position at max leverage at the current price. In other words:
Maintenance Margin = Notional Position Value ÷ (2 × Max Leverage)
For example, a 1 BTC long at $50,000 with max leverage 20x:
Maintenance Margin = 50,000÷(2×20)=50,000 ÷ (2 × 20) = 1,250
If your position margin falls below maintenance margin, your position can be liquidated.

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Position health statuses

As price moves, your position can move through these statuses:
StatusWhen it appliesWhat it means for you
Healthyposition margin > maintenance marginNo liquidation risk.
Liquidatable⅔ maintenance margin ≤ position margin < maintenance marginLiquidation can be triggered.
Seizedposition margin < ⅔ maintenance marginRemaining margin is treated as forfeit to the Insurance Fund on close.
Underwaterposition margin < 0Your losses exceed your margin; the Insurance Fund backstops the deficit.

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How liquidation is triggered

Liquidation is triggered by a liquidation transaction, which anyone can submit for a specific position. When liquidation is triggered for a position that has moved from Healthy → Liquidatable:
  • The protocol opens an order to close the position.
  • That close order has no execution price threshold (it is intended to get filled, not “wait for a better price”).
  • The position owner can no longer update the position after liquidation is triggered.
That close order is then processed by the normal matching flow the next time matching runs.
If your position becomes Liquidatable, liquidation is triggered, and the protocol opens a close order. That close order stays open even if price later moves back and your position becomes technically healthy again before matching happens.In other words, once liquidation is triggered, the position is expected to be closed by the protocol during matching.

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What happens when the close order fills

What you receive (or what happens to the remaining margin) depends on the position’s status at the time the close order fills:
  • If the position is Liquidatable at fill: you receive your remaining margin back, minus the standard trading fee (see Fees).
  • If the position is Seized at fill: the remaining margin is sent to the Insurance Fund.
  • If the position is Underwater at fill: the Insurance Fund pays the deficit (the negative margin) so the system remains solvent.
You can learn more about the backstop mechanism on the Insurance Fund page.

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Liquidation price

Your liquidation price is the price at which your position margin would fall to exactly the maintenance margin level. Beyond this price, your position becomes liquidatable. For a long position, the liquidation price is below your entry price. For a short position, it is above your entry price. Higher leverage means your liquidation price is closer to your entry price.