Understand the rules and precautions of compulsory liquidation

Forced liquidation means that when the balance of funds in an investor's account is insufficient to pay the related expenses of its open position, the exchange will automatically force liquidation of the investor's position to ensure that the funds in the investor's account will not suffer losses. Forced liquidation is an important risk management measure, which can effectively prevent the loss of funds in investors' accounts, but it will also bring certain risks. Therefore, investors should understand the rules and precautions of compulsory liquidation when trading, so as to better control risks.

First, compulsory liquidation rules

Forced liquidation means that when the balance of funds in an investor's account is insufficient to pay the related expenses of its open position, the exchange will automatically force liquidation of the investor's position to ensure that the funds in the investor's account will not suffer losses. Generally speaking, the rules of compulsory liquidation include:

1. Trigger condition of forced liquidation: When the fund balance in the investor's account is insufficient to pay the related expenses of his open position, the exchange will automatically force liquidation of the investor's position.

2. Handling method of forced liquidation: The Exchange will automatically and forcibly liquidate the investor's position according to the fund balance in the investor's account and the related expenses of the investor's open position, so as to ensure that the funds in the investor's account will not suffer losses.

3. The result of forced liquidation: the fund balance in the investor's account will be cleared, the investor's open position will be forced to liquidate, and the investor will no longer have any positions.

II. Matters needing attention in compulsory liquidation

Forced liquidation is an important risk management measure, which can effectively prevent the loss of funds in investors' accounts, but it will also bring certain risks. Therefore, investors should pay attention to the following points when trading:

1. Investors should be familiar with the compulsory liquidation rules in order to better control risks.

2. Investors should regularly monitor the balance of account funds to ensure that the balance of account funds is sufficient and avoid being forced to close positions.

3. Investors should regularly monitor the relevant expenses of open positions to ensure that the fund balance in the account is sufficient and avoid being forced to close positions.

4. Investors should monitor the market regularly so as to adjust their investment strategies in time and avoid being forced to close their positions.

Investors should be familiar with the forced liquidation mechanism of the exchange in order to better control risks.

Third, the risk of forced liquidation.

Forced liquidation is an important risk management measure, which can effectively prevent the loss of funds in investors' accounts, but it will also bring certain risks. Therefore, investors should understand the risk of forced liquidation when trading, so as to better control the risk.

1. Market risk: Forced liquidation will lead to forced liquidation of investors' open positions, so investors may face market risk, that is, investors' open positions may suffer losses due to market fluctuations.

2. Capital risk: Forced liquidation will lead to the clearing of the balance of funds in the investor's account, so investors may face capital risk, that is, the funds in the investor's account may suffer losses due to market fluctuations.

3. Time risk: Forced liquidation will lead to forced liquidation of investors' open positions, so investors may face time risk, that is, investors' open positions may suffer losses due to the passage of time.

Fourth, summary.

Forced liquidation means that when the balance of funds in an investor's account is insufficient to pay the related expenses of its open position, the exchange will automatically force liquidation of the investor's position to ensure that the funds in the investor's account will not suffer losses. Forced liquidation is an important risk management measure, which can effectively prevent the loss of funds in investors' accounts, but it will also bring certain risks. Therefore, investors should understand the rules and precautions of compulsory liquidation when trading, so as to better control risks. Investors should regularly monitor the balance of account funds, the related expenses of open positions and market conditions, so as to adjust investment strategies in time and avoid being forced to close positions. In addition, investors should also be aware of the risk of forced liquidation, so as to better control the risk.