The difference between liquidation and liquidation_What are the differences between liquidation and liquidation in the currency circle?

In the currency circle, "forced liquidation" and "liquidation" are two common trading results, but their essence and impact are completely different. "Forced liquidation" is a forced liquidation operation by an exchange or platform to prevent traders from suffering excessive losses due to market fluctuations. "Liquidation" means that the trader's position completely suffered a loss and was unable to repay the debt, so it was forced to liquidate.

The difference between liquidation and liquidation

Get straight to the point:

Liquidation and liquidation are both risk management mechanisms used in futures trading to protect traders and platforms, but there are key differences between the two.

Details:

1. Trigger conditions

• Liquidation: When Triggered when account funds (margin) fall below the minimum requirement to maintain a position (maintenance margin rate).
• Liquidation: Triggered when the account funds are completely lost or even have a negative value.

2. Impact

• Liquidation: Some or all positions are forced to be liquidated in order to protect the account from to further losses.
• Liquidation: All positions in the account are forced to be liquidated, and traders may face losses greater than the account funds.

3. Degree of loss

• Liquidation: Usually it will not lead to liquidation because there is still balance in the account funds.
• Liquidation: It may cause the trader to lose more than all the funds in the account, or even become in debt.

4. Execution method

• Liquidation: Usually executed automatically by the exchange or broker to protect the platform and traders.
• Liquidation: Also executed by an exchange or broker, but may require the trader’s explicit authorization or consent.

5. Attribution of Responsibility

• Liquidation: The trader assumes responsibility for failing to maintain appropriate margin levels .
• Liquidation: The trader is fully responsible for failing to effectively manage risk.

6. Recovery possibility

• Liquidation: After the account has sufficient funds, traders can re-open positions.
• Liquidation: After the account becomes indebted, the trader may not be able to recover funds and may even need to repay the debt.

Conclusion:

Understanding the difference between liquidation and liquidation is crucial as this can help traders develop appropriate risk management strategies to avoid heavy losses.

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