How to Manage Margin Liquidation Risk
Understand when and how margin liquidation occurs, and learn strategies to prevent forced closure of your positions.
Liquidation on margin is forced selling of your collateral to repay the loan, and it happens at the exchange's timing rather than yours. Everything that reduces the risk is done beforehand: less leverage, more collateral headroom and a stop-loss placed when the position is opened. Midas also sends margin alerts as the ratio falls, but a fast market can outrun them, so they cannot replace any of these.
Before you start
- An open margin position, its liquidation price, and notifications allowed on your device.
- The risk disclosure read.
Understand Liquidation Triggers
Margin liquidation is triggered when your margin ratio falls below the maintenance margin requirement. This happens when the value of your collateral drops (market moves against you) or your loan interest accumulates beyond what your collateral can support.
Check Your Liquidation Price
Navigate to Margin Account > Risk Score to view your estimated liquidation price for each borrowed position. This tells you exactly how far the market needs to move before your account reaches liquidation. The system also provides a 'Liquidation Projection' showing the impact of different price scenarios.
Receive Warning Notifications
Midas sends progressive warnings as your margin ratio decreases. Alerts go out when your ratio crosses predefined thresholds: a caution alert when approaching risk, a warning when close to danger, and a final urgent alert before liquidation. In a fast market your ratio can pass several thresholds quickly, so you may not get every alert, and liquidation can come first. Your notification settings cannot turn these alerts off: they reach you in the app, and by push if the mobile app is allowed to notify you. They are not sent by email.
Add Collateral to Prevent Liquidation
If your margin ratio is declining, transfer additional assets from your Spot wallet to your Margin account. This increases your collateral value and pushes the liquidation price further away. You can also partially repay loans to reduce your obligations and improve the ratio.
Use Stop-Loss Orders Proactively
Set stop-loss orders on your margin positions to automatically exit before the liquidation price is reached. A stop-loss triggered at a controlled level is far better than a forced liquidation, which may execute at unfavorable prices due to market volatility and incur additional liquidation fees.
Risk Disclaimer
Margin trading involves significant risk. Leveraged positions can result in losses exceeding your initial collateral. You are responsible for repaying all borrowed funds plus interest regardless of trading outcomes. This tutorial is for educational purposes only and does not constitute financial advice.
If something goes wrong
- A margin call arrived overnight.
- Crypto markets do not close. Either size so an overnight move is survivable, or keep a stop-loss that acts while you sleep.
- Adding collateral did not move the liquidation price much.
- At high leverage the relationship is unforgiving. Reducing the position moves it further than topping up does.
Frequently asked questions
- Am I warned before liquidation?
- Usually, but not always. Warnings are sent as the ratio deteriorates, in the app, and by push if the mobile app is allowed to notify you. They are not sent by email. In a fast market liquidation can follow a warning almost at once, or come before one is sent.
- What is the most reliable protection?
- Lower leverage. Every other measure is a mitigation on top of position size.
- Does a stop-loss guarantee I avoid liquidation?
- No. It closes at market when triggered, and a gap can carry price past it. It makes liquidation much less likely, not impossible.
- Is partial liquidation possible?
- Where the system can restore the ratio by closing part of a position, it will. A full liquidation is what happens when partial closure is not enough.