Is there any difference between futures liquidation and forced liquidation? Will futures liquidation forcefully close positions?

Filing out positions and forced balance in cryptocurrency futures trading: the key differences in risk management

In cryptocurrency futures trading, the terms "filter" and "forced flat" are often mixed, but there are key differences between them. Understanding this distinction is crucial for investors to manage risk and develop trading strategies. Although both are intended to protect the risk control mechanisms of traders and exchanges, forced tilting focuses more on the forced tilting of exchanges.

What is the difference between liquidation and forced settlement?

Binding and forced liquidation refer to the closing measures taken by the exchange when the margin is insufficient, but forced liquidation emphasizes the mandatory nature of the exchange, while liquidation is a broader description. A liquidation refers to the forced liquidation of all positions due to violent market fluctuations and investors' losses exceeding the total margin of the account. Simply put, liquidation is an extreme situation of forced liquidation. Investors not only lose all margin, but may also face additional debt recovery.

First balance is the risk control mechanism of cryptocurrency trading platforms. When the market conditions are not good for a position and the investor's account margin is not enough to meet the maintenance margin requirements, the platform will automatically close some or all of its positions to limit further losses.

Although both are related to unfavorable market conditions, there are three key differences:

1. Triggering conditions: Forced clearance occurs when margin falls below a certain threshold, while liquidation occurs when losses exceed the total assets of the account.

2. Result: Forced clearance may only liquidate some positions, while liquidation means that all positions are fully liquidated.

3. Other risks: Winning positions may cause investors to face debts that exceed the initial investment amount.

Will futures liquidation be forced to close positions?

Yes, futures liquidation will inevitably lead to forced closing of positions. When the trader's account funds are insufficient to maintain their margin requirements, the trading platform will force the position to protect the interests of the trader and the platform and avoid further losses.

When the margin for futures trading accounts is lower than the maintenance margin requirement, you face the risk of liquidation. A liquidation means that the account cannot continue to maintain its existing position because margin is not enough to cover potential losses. Once the position is broken, the exchange will automatically forcefully close the position and liquidate the position to make up for the insufficient funds. This may cause traders to suffer significant financial losses, and large-scale liquidation will also intensify market volatility.

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