💸Liquidation
Last updated
Last updated
In perpetual futures trading, liquidation typically occurs when a trader's margin balance falls below the maintenance margin.
Margin balance is the sum of a wallet balance and unrealized PnL, while maintenance margin is the minimum amount of margin traders must maintain in order to keep their futures position open.
Note that all open orders will be immediately canceled in the forced liquidation process.
User Jotaro used his test sub-account to buy 1.127032 BTC/USDC and 3 ETH/USDC short positions with entry prices of 27352.76 and 1843.5, respectively.
At this time:
| Entry Info | Entry Price | Position Margin | Liquidation Price |
|---|---|---|---|
BTC/USDC | 27352.76 | 3188.94 | 28405.45 |
ETH/USDC | 1843.5 | 560.07 | 1962.98 |
The market sentiment was bullish, and the mark prices of BTC/USDC and ETH/USDC continued to rise, reaching 28295.04 and 1866.9. At this point, we can see from the figure below that Jotaro's risk ratio had climbed to a dangerous 94.64%.
Still, Jotaro did not choose to close his position to stop the loss but continued to hold it. Soon, the risk ratio of Jotaro's test sub-account reached 100% and entered the liquidation process.
If we check Jotaro's liquidation transaction records, we can clearly see the liquidation status of Jotaro's BTC/USD and ETH/USDC positions in the ‘test’ sub-account:
During the liquidation of both of Jotaro's positions:
JOJO's system will try to sell Jotaro's position at a discounted price based on the mark price. If Jotaro's position is long, then the liquidation of Jotaro's position is equivalent to the liquidator taking over the liquidated position at a lower price, i.e., mark price * (1-price off); if Jotaro's position is short, then the liquidator taking over the position will be at a higher price, i.e., mark price * (1+price off). Anyone interested in this transaction can join the liquidation and be called a ‘liquidator.’ JOJO's price off is 0.01 (This parameter may change in the future, please refer to JOJO's announcement for updates.).
During the liquidation of Jotaro's position, the liquidator first bought Jotaro's BTC/USDC short position for 28,689.50, calculated as 28,405.45 * 0.01 + 28,405.45. Then, the liquidator bought Jotaro's ETH/USDC short position for 1,982.61, calculated as 1962.98 * 0.01 + 1962.98（please notice that the 0.01 liquidation buffer may change in the future. Please refer to JOJO's announcement for updates.).
In addition, 0.04 (This parameter varies from different pairs, please refer to the specifications on the trading page) of Jotaro's position margin will be recharged into JOJO's Insurance Fund, and this insurance fund will be used to compensate for under-collateralization in extreme market conditions.
After the liquidation process is complete, Jotaro's position still has 54.28 USDC remaining, which will be left in Jotaro's account.
For more details on JOJO's liquidation rules, please visit:https://jojo-docs.netlify.app/liquidation
NOTE:
If you have two or more positions in the same direction and the price fluctuation direction is the same, the fluctuation of the forced liquidation price will be faster than that of a single position.
Maintenance margin refers to the minimum amount of USDC (or JUSD) necessary to ensure the safety of a user's account when placing orders at the current position. Maintenance margin = ∑(abs(paper Size) * Mark price * Maintenance Margin Ratio)
| Pair | Maintenance Margin Ratio |
|---|---|
BTCUSDC | 2% |
ETHUSDC | 2% |
others | 5% |
To avoid being liquidated, it's important to understand the risks associated with your investment and to manage your position carefully. Here are some tips to help you avoid liquidation:
Set stop-loss orders: A stop-loss order is an order to sell your position if the price falls below a certain level. Setting a stop-loss order can help you limit your losses and avoid being liquidated.
Monitor your position: It's important to monitor your position regularly to ensure that you are not at risk of being liquidated. Keep an eye on the price of the asset you are invested in and be prepared to take action if necessary.
Manage your leverage: If you are using leverage to trade, it's important to manage your position carefully. JOJO can provide up to 25x leverage, make sure you understand the risks associated with leverage and use it responsibly.
Diversify your portfolio: Diversifying your portfolio can help you spread your risk and avoid being overly exposed to any one asset. Consider investing in a variety of assets to reduce your risk of being liquidated.
Stay informed: Keep up to date with the latest news and developments in the market to ensure that you are aware of any potential risks or opportunities. This will help you make informed decisions and avoid being caught off guard.
Remember, investing always carries some level of risk, and there is no guaranteed way to avoid being liquidated. However, by following these tips and managing your position carefully, you can reduce your risk and increase your chances of success.
Click 【Main Account】 button on the upper right corner and choose 【Asset】
On the 【Asset】 page you will be able to view all the trades details, such as records for Transfer, Liquidation, etc.
| Terms | Explanations | Calculation |
|---|---|---|
Liquidation price | Because JOJO uses a cross-margin system, all positions share the same margin account. Therefore, once a user holds multiple positions, different markets may affect one another, resulting in the Final Liquidation Price differing from the Initial Liquidation Price. | / |
Mark price | The Mark Price is a mechanism used in perpetual contracts trading on JOJO to ensure fair and accurate pricing of futures contracts. JOJO's mark price comes from Chainlink and Uniswap Oracle and is mainly used to calculate PnL. | / |
Total balance | The total value of all assets in the user's account, calculated in USDC based on the real-time price of Chainlink. | / |
Initial margin | The initial margin determines whether there is enough margin when placing an order at the current position the user wishes to open. As long as the user's account balance exceeds the initial margin, they can open a position on JOJO. | initial Margin = abs(paper Size) * order Price * initial Margin Ratio |
Initial margin ratio | The initial margin ratio is the minimum margin required in a user's account when placing an order. It is calculated as the product of the initial margin ratio and the margin required for the desired order size. The initial margin ratio also determines the maximum leverage allowed, with JOJO currently allowing a maximum leverage of 10X.The initial margin ratio is the minimum margin required in a user's account when placing an order. It is calculated as the product of the initial margin ratio and the margin required for the desired order size. The initial margin ratio also determines the maximum leverage allowed, with JOJO currently allowing a maximum leverage of 10X. Please note that the initial margin ratio may change in the future. Please refer to JOJO's announcement for updates. | max leverage = 1/initial margin ratio 10% |
Maintenance margin | Maintenance margin refers to the minimum amount of USDC (or JUSD) necessary to ensure the safety of a user's account when placing orders at the current position. | Maintenance margin = ∑(abs(paper Size) * mark price * maintenance Margin Ratio) |
Maintenance Margin Ratio | Generally speaking, the value of the maintenance margin ratio is usually lower than that of the initial margin ratio. Otherwise, users may be liquidated shortly after placing an order. Please note that the maintenance margin ratio may vary across different trading pairs. For more information, please refer to the 'Specification' section at the top right corner of the price chart on the trading page. | / |
Position margin | Position margin used for the order | Position margin= ∑(abs(paper size) * mark price * initial Margin Ratio) |
Paper size | Quantity of tokens in the position | / |
Current price | The real-time price of a certain token from Chainlink. | / |
Liquidation threshold | The maintenance margin ratio is equivalent to the liquidation threshold. They are measured from the perspectives of 'the minimum percentage of maintenance margin to ensure not being liquidated' and 'the percentage of maintenance margin that, if breached, would trigger liquidation.’ They are mainly used to differentiate between them in contract codes. Please note that the liquidation threshold may vary across different trading pairs. For more information, please refer to the 'Specification' section at the top right corner of the price chart on the trading page. | 6% |
Risk ratio | The value that measures the risk of the account. | risk ratio = maintenance margin/total balance |
JOJO uses an Insurance Fund to avoid auto-deleveraging and socialize losses. If liquidation results in bad debt, the insurance fund will be fully borne by the insurance fund account.
At the same time, each liquidation will deduct a portion from the user's margin to be deposited into the insurance fund account. After liquidation, the user's credit balance may exist in the following scenarios:
If the credit amount is negative, the insurance account will be used to offset the bad debts.
If the user has remaining credits but insufficient funds to cover the insurance fee, the insurance will claim all remaining credits.
If the user has sufficient credits to pay the insurance fee, any remaining credits will be refunded.
insuranceFee = LiquidatorCreditChange∗insuranceFeeRate The insurance fee rate is different for different markets.
