Liquidation Process

AAX uses marked price to avoid liquidation caused by low liquidity or market manipulation. When available balance decreases to 0 and position margin decreases to maintenance margin level, the position is liquidated. Liquidation refers to an event when margin level hits the Maintenance Margin, the position has to be closed and you lose all your Maintenance Margin. It is triggered when the Marked Price hits the Liquidation Price.

Liquidation Price is a price level that indicates you have lost all your initial margin. Upon liquidation, the liquidated position will be closed at the Liquidation Price, and this means that you have lost all your initial margin. If the liquidated position has its final liquidation price better than the marked price, the excess margin will be contributed to the Insurance Fund. Vice versa, if the liquidated position has its final liquidation price worse than the marked price, the Insurance fund will cover the loss gap.

Liquidation Price

Position Margin = Position * Open Price * Multiplier (1 / Leverage + Fees Rate)

Long Position Liquidation Price =

[Open Price * (1 + Main. Margin Rate) - Position Margin / (Position * Multiplier)] / (1 - Fees Rate)

Short Position Liquidation Price =

[Open Price * (1 - Main. Margin Rate) + Position Margin / (Position * Multiplier)] / (1 + Fees Rate)

*Maintenance Margin Rate

**Fees Rate

Example:

Assuming trader A holding a 10 Long position at 7,043.90 USDT with 25x leverage.

Position Margin = 10 * 7,043.90 * 0.001 (1 / 25 + 0.02%)

= 2.8316478 USDT

Liquidation Price = [7,043.90 * (1 + 0.5%) - 2.8316478 / (10 *0.001)] / (1 - 0.02%)

= 6,794.31418 USDT

Screenshot_2020-04-23_at_3.18.40_PM.png

**Examples above may not reflect on the real market as it varies on other conditions such as volume, fees, risk level, etc.

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