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.
If Margin Level reaches a certain, pre-specified, threshold, the trader receives a Margin Call — notification that there might be a danger of forcibly closing of all trader’s positions to restore margin level. When a Margin Call occurs, traders decide what to do next with their positions — accept the risk, close some positions, or add funds to increase the margin level.
Margin Call levels and liquidation levels
CEX.IO Broker set a few Margin Call levels to alert and to allow the trader to make adjustments before the involuntary liquidation. At CEX.IO Broker, those levels depend on the trader’s leverage. For most leverages, the Margin Call levels are 75%, 50%, and liquidation takes place when the margin level reaches 25%. This applies to accounts with 2x, 3x, 5x, 10x, 25x leverage.
If you trade with 50x or 100x leverage, then margin call levels are 90%, 70%, and liquidation level is 50%. As 50x and 100x leveraged positions are much riskier, even a slight volatility can put a trader at risk of losing all capital. Stricter margin call and liquidation levels for high leverage accounts puts a limit on users’ losses spinning out of control.
It means if a trader wants to maintain positions open, the margin level has to stay above 25% for accounts with leverage of 2x, 3x, 5x, 10x, 25x. Respectively, margin level needs to be higher than 50% for accounts with leverage of 50x and 100x. Otherwise, a process called Liquidation automatically closes all the positions on the trading account to restore the Margin Level.
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.
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.
Here’s the table of Margin Call and Liquidation levels:
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 does not affect positions of another trading account. 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.
Note that the only place to get a timely notification about a margin call is in the trading terminal. When your positions are at risk, you will get a notification in the message window immediately. While we send out the margin call emails, we do not control the speed of the internet and mailing service. Hence, emails may not be a reliable notifier for the margin calls.
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.