Help CenterThis article outlines how liquidation functions within IMBX Margin Trading. It describes the conditions under which liquidation occurs, what parameters contribute to it, and how you can proactively manage risk to safeguard your positions.
What Does Liquidation Mean in Margin Trading?
Liquidation refers to the automatic closing of your positions when your available collateral becomes inadequate to support your borrowed assets. If market conditions cause your margin account to fall below a required threshold, IMBX will intervene to prevent further losses by closing part or all of your positions.
IMBX recognizes two types of liquidation scenarios:
1. Partial Liquidation
The system may close a portion of your exposure to lower your account risk level below the critical threshold.
2. Complete Liquidation
If your margin risk exceeds the limit and partial liquidation is insufficient, IMBX may fully close all active positions in your margin account.
Key Conditions That Can Lead to Liquidation
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Volatile Price Swings: Adverse price movement in your trading pair reduces your margin asset value.
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Excessive Use of Leverage: Higher leverage shrinks your buffer, making your account more vulnerable.
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Rising Interest Costs: Interest charges on borrowed capital steadily increase your total liabilities.
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Depreciating Collateral: If the market value of your pledged asset declines, your margin coverage weakens.
When Does Liquidation Take Place?
Liquidation is executed when your Margin Risk Ratio (MRR) reaches or surpasses the critical risk level predefined by the system.
How to Calculate MRR:
Margin Risk Ratio=LiabilitiesAssets
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Assets: The sum of your collateral and unrealized gains.
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Liabilities: Outstanding borrowed funds plus accrued interest.
Risk Triggers:
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Warning Threshold (0.80): At this stage, IMBX alerts you to take corrective actions—such as adding funds or adjusting positions.
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Liquidation Threshold (1.00): Once MRR hits or exceeds 1.0, automatic liquidation procedures are initiated.
Example:
Assets = $10,000; Liabilities = $7,000
MRR = 7,000 / 10,000 = 0.70 → Below alert level → No action needed yet.
Assets = $7,000; Liabilities = $7,000
MRR = 1.0 → Liquidation begins.
Risk Management Best Practices
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Track Your Risk Ratio Consistently
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Monitor your MRR within the trading dashboard to stay informed.
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Top Up Your Collateral
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Depositing additional funds can improve your asset-to-debt ratio.
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Reduce Outstanding Loans
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Repay part or all of your borrowed funds to lower your exposure.
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Moderate Your Leverage
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Lowering leverage reduces the impact of price volatility.
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Watch Critical Indicators
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MRR (Risk Ratio): Key indicator of margin health
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Maintenance Margin Ratio (MMR): Threshold at which liquidation occurs
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Collateral Valuation: Market value of your pledged assets
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Frequently Asked Questions
What becomes of my collateral if liquidation happens?
The system uses your collateral to settle your debt and accumulated interest. Any leftover balance is returned to your account.
Does liquidation incur any fees?
Yes, IMBX applies a liquidation handling fee. You can refer to the [IMBX Fee Schedule] for exact details.
Will I get notified before liquidation?
IMBX sends alerts through email or push notifications as your MRR nears the caution level. Still, it is your responsibility to actively monitor your account.
Can I act early to avoid liquidation?
Absolutely. You can close positions manually or reduce size before automated liquidation is triggered.
Is there a way to estimate the liquidation price?
Yes. It depends on your leverage, collateral amount, and borrowed size. IMBX will soon offer a calculator for liquidation price estimation.
Important Notice
Trading on margin carries significant financial risk. This content is for informational purposes only and does not represent investment advice. IMBX is not liable for losses incurred due to market activity. Always trade responsibly and assess your risk tolerance thoroughly.
IMBX — Designed for Smart, Controlled Margin Trading