BitTap futures liquidation is a risk control mechanism that automatically executes when an account’s margin falls below the maintenance margin required by the platform. The purpose of liquidation is to prevent users from incurring larger losses due to market fluctuations and to ensure the safety of both the exchange and user funds.
Conditions for Liquidation Trigger
In BitTap futures trading, liquidation occurs under the following conditions:
- Insufficient Maintenance Margin: When a user’s account balance is not enough to maintain the required margin for their current position, the system enforces liquidation.
- High Market Volatility: If extreme market price fluctuations result in a user’s position incurring significant losses, causing the maintenance margin to fall below the minimum requirement, the system will immediately liquidate the position.
Liquidation Execution Process
- Warning Notification: When an account nears the liquidation threshold, the system may send a warning to prompt the user to add more margin.
- Automatic Liquidation: If the account margin falls below the maintenance margin requirement, the platform will automatically initiate liquidation, partially or fully closing the user’s position to prevent further loss.
- Liquidation Fee: Liquidation typically incurs an additional clearance fee, which covers the platform's risk of forced liquidation in extreme conditions.
How to Avoid Liquidation
- Maintain Adequate Margin: Users should ensure sufficient margin in their account, especially during high market volatility. Adding margin can help avoid liquidation.
- Set Stop-Loss Orders: By using stop-loss orders, users can automatically close positions when the market reaches an unfavorable level, reducing the risk of further losses and preventing liquidation.
- Use Leverage Responsibly: Higher leverage reduces margin requirements but increases risk. Selecting a reasonable leverage level can reduce the risk of forced liquidation.
Consequences After Liquidation
- Position Closure: After liquidation, the user’s position is fully closed, and any remaining funds are returned to the account.
- Liquidation Record: Transactions resulting from liquidation are marked as "Liquidation Clearance" in the user’s trade history, which can be viewed at any time.