Liquidation process
In this article, we will analyze the key distinctive features of the liquidation processes on the Binance and Bybit exchanges.
Last updated
In this article, we will analyze the key distinctive features of the liquidation processes on the Binance and Bybit exchanges.
Last updated
It is important to note that all actions (order execution, position liquidation, liquidation fee deductions) are carried out solely by the exchange according to its regulations. The Tiger.com Broker service and the Tiger.com terminal do not influence these processes.
This article is for informational purposes only. The Tiger.com team strongly recommends carefully studying the documentation directly on the exchange’s website.
Liquidation is the forced closure of a position by the exchange due to a partial or complete loss of its initial margin. This occurs when a trader does not have sufficient funds to maintain an open position.
You can check the liquidation price of your position in your Tiger.com Broker account on the Orders and Positions page:
During the liquidation process, the exchange considers multiple parameters, including the Maintenance Margin Rate and the Initial Margin Rate.
Initial margin represents the collateral required to open a leveraged position. The higher the leverage, the lower the required initial margin.
Maintenance margin is the minimum margin that must be maintained in your account to keep your position open. If your account balance falls below the required maintenance margin level, the exchange triggers the liquidation process. As the position size increases, the required maintenance margin will also increase at a fixed percentage.
During liquidation, the position will be closed at the bankruptcy price (a specific price level at which the trader loses their entire initial margin).
For example, if you open a long position at 1000 USDT (buying 1 contract) with 5x leverage, the liquidation process would proceed as follows:
If the liquidation price is better than the bankruptcy price, the difference (liquidation price - bankruptcy price) will be directed to the exchange’s insurance fund.
If the liquidation price is lower than the bankruptcy price, the losses will exceed your initial margin. In this case, the insurance fund will cover the deficit.
For more details about the insurance fund, refer to the exchange documentation: Binance Insurance Fund Bybit Insurance Fund
Depending on the exchange you are trading on, the liquidation protocols may differ. Technical documentation is available on the exchange’s website: Binance Liquidation Protocols Bybit (UTA) Liquidation Protocols
If, during liquidation, the losses exceed your initial margin, the exchange’s insurance fund covers this difference to prevent your account balance from becoming negative. However, if a large number of positions are liquidated simultaneously, resulting in excessive losses that exceed the available margin, the insurance fund may be fully depleted.
In such a case, the exchange triggers the auto-deleveraging (ADL) process—closing opposite profitable positions to cover the remaining losses. By reducing opposite positions, the ADL system manages risks and maintains platform stability during extreme market volatility.
Each futures position will have an associated indicator showing the likelihood of being subjected to ADL liquidation. You can check your status in your Tiger.com Broker account on the Orders and Positions page:
For more details on auto-deleveraging protocols, refer to the exchange documentation: ADL on Binance ADL on Bybit
When trading with isolated and cross-margin, the exchange liquidates a position when the liquidation price equals the mark price.
The mark price is calculated based on funding data and a basket of prices from multiple spot exchanges. Your liquidation price and unrealized PnL are calculated based on the mark price.
Under ideal conditions, the mark price of USDT futures follows the price of the underlying asset (spot). However, due to the independent supply and demand dynamics of USDT futures, the mark price and the last price may not always match.
At this time, the Tiger.com terminal and broker account do not provide the option to display the mark price chart. You can switch from the last price to the mark price on Binance’s website in the relevant trading chart:
The liquidation price is calculated by the exchange as follows:
This formula applies to both isolated and cross-margin trading, with the only difference being the size of the allocated margin collateral:
In cross-margin mode, WB = crossWalletBalance. In isolated margin mode, WB = isolated wallet balance, where TMM = 0 and UPNL = 0.
This article explains in detail how to use this formula to manually calculate the liquidation price. However, you don’t need to manually input your position data every time—the Binance website provides a special calculator for this calculation:
❓ After liquidation, you may notice that your account balance has decreased by more than just the loss amount. You can track exchange deductions in your Tiger.com Broker account. For example, in the case of liquidation, you will see an Insurance Clearance Fee deduction on the History page—this is the exchange’s liquidation fee:
Important: the liquidation process and all related deductions are performed by the exchange and do not depend on the brokerage service. The liquidation fee for each instrument is listed on the Binance Trading Rules page (column Liquidation Clearance Fee):
❗️ If a trader’s account balance becomes negative due to one or more bankrupt positions, Binance will use the futures insurance fund to automatically cover the deficit and minimize losses.
According to the exchange’s documentation, automatic debt repayment on negative balance accounts occurs every ten minutes for users who meet the following criteria:
The Multi-Asset Mode is not enabled.
There are no open positions (cross or isolated) in the USDⓈ-Margined account with a negative balance.
There are no open positions (cross or isolated) in the Coin-Margined account with a negative balance.
The user has not deposited funds to cover losses after liquidation.
Until the exchange compensates for the cash deficit from the insurance fund, do not deposit additional funds to cover the negative balance, as no compensation will be provided. This rule applies to liquidations under cross-margin mode.
A Bybit via Tiger.com Broker account is a UTA account. Bybit’s UTA liquidation protocols apply to broker accounts.
In isolated margin mode, the risk of liquidation is assessed based on the margin allocated for each position. Liquidation is triggered when the mark price reaches the liquidation price.
For more details on the liquidation procedure in isolated margin mode, refer to the exchange documentation.
You can switch from the last price to the mark price on the Bybit website in the relevant trading chart:
In cross-margin mode, the risk of a UTA account is assessed using the Initial Margin Rate (IMR) and Maintenance Margin Rate (MMR) for all positions. Liquidation is triggered when MMR reaches 100%.
For a detailed formula on calculating maintenance margin, refer to this article.
❓After liquidation, you may notice on the chart that the closing price of your position is outside the traded candlestick range:
This happens because the liquidation price is calculated based on the mark price, which often differs from the last price. At the same time, chart rendering on Tiger.com is based on the last trade price. That is, when a trade occurs on the exchange at a certain price, the Close level for the current candlestick (built using the OHLC mechanism) shifts to that level. Since exchanges do not broadcast liquidation events as trades, they do not appear within the candlestick range.
For more details on this feature, refer to the Bybit article.
If you are unsure whether your position was actually liquidated, you can check this on Binance by applying the "INSURANCE_CLEAR" filter on the History page:
If a deduction appears for the relevant instrument, it means the position was indeed liquidated, and a liquidation fee was charged.
Bybit does not charge a liquidation fee for USDT perpetual futures. However, in the Tiger.com Broker account, liquidated positions will be marked with the "LIQUIDATION" flag, which can also be filtered on the History page:
Since the liquidation of positions and all related operations are carried out exclusively by the exchange (the broker does not influence these processes), we recommend to direct any questions regarding documentation or details of past liquidations directly to the exchange’s support team.
