How liquidation actually happens

The moving parts

Four quantities determine whether a position survives: the margin backing it, the maintenance margin required to keep it, the mark price used for valuation, and the funding payments that accrue while it is open.

• Margin — the collateral supporting the position.
• Maintenance requirement — the minimum margin ratio the position must keep.
• Mark price — the reference price used for valuation and liquidation, not necessarily the last trade.
• Funding — periodic payments that can erode margin even in a flat market.

Leverage and distance to liquidation

Leverage compresses the distance between entry and liquidation. At high leverage the required adverse move becomes small enough that ordinary volatility, not a crash, is sufficient — and in fast markets the liquidation can execute at a worse price than the theoretical level.

In stressed conditions auto-deleveraging can also come into play, closing positions to protect the system when the liquidation engine cannot absorb the imbalance. Neither the timing nor the price of these events is under your control.

What isolation contains

Because each leader trades in its own sub-account, a liquidation there consumes that sub-account's margin and stops. It does not reach across to another leader's collateral or force closes elsewhere in the book.

That containment is the strongest structural protection in the framework, and it is still only containment. The capital in the affected sub-account can be lost.

Read this as a warning, not a mechanism

Perpetual futures can lose the entire value of a position, quickly, and gapping markets can produce outcomes worse than the modelled liquidation price. No scoring model, cap or isolation scheme changes that.

Past performance is not indicative of future results. Perpetual futures are leveraged instruments and carry a substantial risk of loss, including the loss of your entire position.