Analysis of liquidation algorithm of Euro-Italian Exchange

The liquidation algorithm of Euro-European Exchange uses the margin ratio and maintenance margin rate mechanism. When the margin ratio is lower than the maintenance margin rate, a liquidation is triggered. Positions are closed in the order of opening time, and profitable positions are closed first. In order to avoid liquidation, it is recommended to manage risks, understand market dynamics and use leverage cautiously.

Analysis of the liquidation algorithm of Euro-Italian Exchange

What is the liquidation algorithm?

Liquidation algorithm is a trading mechanism. When the balance of the margin account is insufficient to maintain the value of the position, the position will be liquidated.

European Exchange’s Liquidation Algorithm

European Exchange uses a liquidation algorithm based on Margin Ratio and Maintenance Margin Rate.

• Margin ratio: The ratio of the required margin to the value of the position.
• Maintenance margin rate: The threshold that triggers liquidation after the value of the position drops to a specific level.

The liquidation process

The liquidation process is as follows:

1. Drop in value of open positions: Changes in market prices lead to a decrease in the value of open positions.
2. The margin ratio is higher than the maintenance margin rate: If the margin ratio is still higher than the maintenance margin rate, the liquidation will not be triggered.
3. The margin ratio is lower than the maintenance margin rate: When the margin ratio is lower than the maintenance margin rate, the system will start to close the position to reduce losses.
4. Closing order: The system will close positions in the order of opening time, first closing profitable positions, and then closing losing positions.
5. Forced liquidation: If the margin account balance is still insufficient to maintain the position after the position is closed, all remaining positions will be forced to be liquidated.

How to avoid liquidation?

The main ways to avoid liquidation include:

• Manage risk: Use stop-loss orders and margin management tools to limit potential losses.
• Understand market dynamics: Pay close attention to market trends and news events to make informed trading decisions.
• Use leverage with caution: Leverage amplifies returns but also magnifies risks, and should be used with caution based on personal risk tolerance.

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