What are the specific conditions for compulsory liquidation?

What are the specific conditions for compulsory liquidation?

When will we be forced to close our positions? For beginners, the word forced liquidation may sound terrible, but it is not clear what impact it has on us. Therefore, Bian Xiao compiled what conditions are compulsory liquidation, and I want to help you.

What are the conditions for compulsory liquidation?

Futures companies have special risk control personnel to monitor the risk of customers' positions in real time, and inform customers based on the degree of risk and force them to close their positions. When the risk degree is lower than 100%, it means that the available funds of the customer except the margin are negative, which is equivalent to occupying the margin of the futures company. At this time, the futures company will notify the customer to increase the margin or reduce the position by phone or SMS. If the customer does not handle it properly, the price will continue to change in a direction that is not conducive to holding positions, and the degree of risk will continue to decline.

What is compulsory liquidation of stocks?

Forced liquidation of stocks means that when the market value of stocks held by investors is lower than the margin ratio stipulated by the exchange, the exchange forces investors to sell their stocks to supplement the margin in order to prevent the risk from further expanding. In other words, compulsory liquidation is a risk control measure, which does not mean that investors have lost money, but one of the measures that investors must take when risks break out.

In stock trading, investors usually use leverage to trade. If the market is unfavorable, the market value of stocks held by investors may fall. If the decline exceeds the margin ratio, the exchange will take compulsory liquidation measures. At this point, investors must replenish the margin in time, otherwise they will face the risk of being forced to sell their shares.

What are the conditions for compulsory liquidation of foreign exchange?

If you are forced to close foreign exchange, then you must mention one word, and that is foreign exchange margin. Margin means that when the available month of your account is less than zero, this part of liquidity is called margin. It is the liquidity that you need to deposit in order to maintain the continuity of transactions, and it is an efficient mechanism. You can borrow money from your brokerage account, but when you borrow money, you need to deposit enough liquidity in your account to ensure that you can bear the potential debt risk.

What are the conditions for compulsory liquidation of foreign exchange? Forced liquidation refers to the risk of forced liquidation when the customer's trading margin is insufficient and not replenished within the specified time, or the position of members or customers exceeds the specified limit, and the foreign exchange price fluctuates greatly and the margin cannot be replenished within the specified time. In addition to the forced liquidation caused by insufficient margin, when the total position of the securities firm entrusted by the customer exceeds a certain limit, it will also lead to the forced liquidation of the securities firm, which will further affect the forced liquidation of the customer.