Trading · 106 / 127 · 2 min
The liquidation engine
The venue does not have to use the last trade. It can use a mark price, an insurance fund, and a rule that closes the other side.
The last trade on a chart is not necessarily the price that closes you.
A worked case
A wick liquidates accounts at a mark price the traders were not watching. The insurance fund covers part of the hole. The rest is taken from profitable positions, which are closed by rule. The winners paid for the losers. The rule was in the contract.
The mark
A wick on the last trade can be ignored, or it can be the price that closes you. The formula is in their contract. The chart on another site is not.
Who pays the rest
An insurance fund pays until it is empty. After that, profitable traders can be closed to cover the hole. That close is auto-deleveraging. The winner is the one who pays.
BitMEX and the engine
BitMEX became widely known for leveraged perpetual contracts. The contracts do not need the last printed trade to be the price that matters. Venues in this family use a mark price, an insurance fund, and, when the fund is not enough, a rule that reduces profitable positions. That rule is auto-deleveraging.
The winner can be the one who is closed. The sentence is in the contract, not on the candle.
Read it yourself
These links are the record. They are not a recommendation, and they are not instructions. A news story or a court paper can still be wrong about a detail. The check does not change because a famous name is in the story.
Apply the check
Open a question. The line is about this topic. It is not a verdict that anything is safe.
The venue, from fees. The insurance fund, until it is empty.
The venue's formula.
The engine. Then auto-deleveraging, which closes someone who was in profit.
Check yourself
Write it in your own words. The course's answer opens after that. Nothing is sent.
After this you can read which price liquidates you, and who pays when the fund is empty.