🌡️Liquidations, Margin Management (CVA), and Account Health
Liquidations
A liquidation event takes place when a trader's account and positions are automatically closed by a liquidator because there is not enough margin in their account to offset unrealized losses. This occurs when the trader's positions move unfavorably to the extent that the Equity Balance drops below the Maintenance Margin (CVA).
Warning: At GemaX, accounts operate on cross-margin, where the Equity Balance reflects the entire account balance, and liquidations lead to the loss of the entire account balance. Users have the option to create isolated sub-accounts to enhance their management of liquidation risk.
Our "Account Overview" tab on the main trading page provides critical indicators to help users manage their account health.
Estimated Liquidation Prices
GemaX aids users in approximating liquidation prices for their new and existing positions. It's important to note that these values are estimates and will adjust dynamically based on your account balance and other open positions. For new trade positions, traders can view their estimated liquidation price in the trade details. Additionally, users with open trades can check their estimated liquidation prices in the "Positions" tab:
Warning: Given the cross-margin structure of accounts, there isn't a definitive liquidation price for your positions. Instead, users should keep an eye on their Remaining Equity to Liquidation to prevent account liquidation. The estimated liquidation price calculations are intricate and are meant to provide an indication only; it's conceivable that your account could be liquidated before reaching this price.
Account Health
Account Health is a percentage that offers a snapshot of a trader's position's overall health and risk level. It serves as a quick indicator of the safety buffer a trader possesses before potential liquidation.
Calculation:
Maintenance Margin (CVA)
CVA represents the total Maintenance Margin necessary for account solvency. Users should comprehend and ensure that their account Equity Balance stays above this value to prevent liquidation. In case of liquidation, the entire account CVA is forfeited or transferred to the counterparty undergoing liquidation. When initiating a trade position, users need to deposit a corresponding CVA amount determined by their position size, contract, and leverage employed:
Note: Increased leverage positions demand a greater CVA, and users employing high leverage should exercise caution to prevent liquidations.
This Maintenance Margin (CVA) serves as the required collateral for each trade initiated on the platform.
The cumulative CVA value of your active positions is displayed on the "Account Overview" tab:
Equity Balance
The Equity Balance represents the comprehensive account balance at any specific point, considering all currently open positions.
It is the combination of the trader's account balance and Unrealized Profit and Loss (uPNL).
Warning: If your Equity Balance drops below the Maintenance Margin (CVA), your account undergoes liquidation, and the CVA amount committed in the trades is lost.
Equity Balance Calculation:
Remaining Equity to Liquidation
The Remaining Equity To Liquidation indicator informs you about the remaining equity balance before your account undergoes liquidation.
Warning: When the Remaining Equity To Liquidation falls to 0, your entire account is liquidated.
Remaining Equity to Liquidation Calculation:
Allocated Balance, Locked Margin, Available for Orders
This section advises the user on their available funds to open orders with and their total allocated amounts.
Locked Margin:
The total margin engaged across all live positions, acting as a buffer to prevent excessive position openings.
Available for Orders:
Represents the funds still accessible for placing new orders.
Conclusion
Comprehending and proficiently handling Account Health and margin is essential for traders on GemaX. By vigilantly monitoring these metrics, traders can make informed decisions, proactively manage risks, and navigate the markets with greater success.
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