Since positions on CEX.IO Broker are leveraged, a certain amount of value is necessary to be maintained on a trading account at all times in order to keep positions open. The sufficiency of that value is measured by the indicator called Margin Level.
Margin Level has to stay above 25% if a trader wants to maintain positions open. Otherwise, a process called Liquidation automatically closes some of the positions on the trading account to free up some margin and to bring the Margin Level above 25%.
CEX.IO Broker Liquidation Level is at 25%
Once Margin Level on a trading account reaches 25%, the liquidation process initiates. That means if you cannot maintain the Margin Level above 25% either by adding more funds to the trading account or by managing your positions, some of your positions will be liquidated automatically.
CEX.IO Broker implements a partial liquidation process. Unlike the full liquidation, which closes all open positions on an account once it reaches the 25% Margin Level threshold, partial liquidation closes just enough positions to restore the Margin Level above 25%. Partial liquidation is deemed less restrictive and allows traders to curb the losses.
Liquidation Process by the Most Negative FPL
If Margin Level reaches 25% on a trading account with more than one position open, the first position to liquidate is the most losing one, i.e. with the most negative Unrealized P&L (also, FPL, as in Floating Profit/Loss).
In case trading on the specific pair is restricted for whatever reason, liquidation procedure skips the position and moves to the next in increasing negative Unrealized P&L ordering (i.e. a position with a little less loss).
In a rare case, when two positions have identical Unrealized P&L that are both the most negative at the moment, which position is liquidated first is determined randomly.
A position is liquidated by sending a Market Order for the full position size. Closing of a position decreases the Used Margin, thereby increasing the Margin Level.
After each position closing, a re-check of the Margin Level against the liquidation level takes place. If the Margin Level remains below 25%, the next most losing position gets liquidated. If the Margin Level restores above 25%, the liquidation process stops.
Working Orders and Liquidation
When a position is closed due to liquidation, all the attached orders are canceled as well. Examples of the attached orders include Stop Loss and Take Profit.
Working opening orders are not canceled by the liquidation procedure. So if you have placed a limit or a stop order, while some of your positions are undergoing the liquidation procedure, those orders will remain outstanding.
Liquidation and Trading Accounts
CEX.IO Broker allows traders to maintain multiple trading accounts. Multiple trading accounts are often used to execute separate strategies or trading styles.
Margin Level is calculated for each individual trading account and not for all trading accounts together. And, while within one trading account, the profit of one position may be used to satisfy margin requirements for the other position (cross-margin), it is not the case for separate accounts. I.e. the profits of one successful trading account may not be used to satisfy the margin requirements of another, money-losing, trading account (isolated margin).
Consequently, liquidation that takes place on one trading account with Margin Level below 25% does not affect positions of another trading account with Margin Level above 25%. If positions on two separate trading accounts have to undergo liquidation, the processes on two accounts are independent from each other.
Liquidation and Negative Balances
In certain situations, the liquidation process may lead to the forming of negative balances on the user’s trading accounts. While CEX.IO Broker will do its best to prevent the occurrence of such situations, rapid price changes and market volatility may make them unavoidable. As a general principle, CEX.IO Broker will cover such negative balances out of its profits to ensure the user can continue trading.
Understanding of Liquidation
Be sure to thoroughly understand the liquidation process on CEX.IO Broker. It is your responsibility to monitor Margin Calls and to take action to avoid the unwanted liquidation of your positions.
This article outlines the current general principles of the liquidation process at CEX.IO Broker. Note that the liquidation rules may change for various reasons including, but not limited to, market conditions, company’s decision, new instruments. Be sure to stay on top of the most up-to-date information about the liquidation process by periodically reviewing Terms of Service, the link to which can be located in the footer of the CEX.IO Broker site.