Liquidations
Understanding how automatic liquidations work and their implications.
What is Liquidation?
Liquidation is an automatic trade closure mechanism that triggers when token prices reach a predetermined threshold. Positions are closed automatically without requiring manual intervention.
Key Benefits
No Exit Fee
No exit fee is charged when liquidations occur automatically. This is an important distinction from manual closures.
Platform Risk Absorption
The platform assumes responsibility for potential additional losses resulting from its own contributed capital during liquidation events. You won't owe extra funds.
How Liquidation Works
- Threshold Set - A liquidation price is established when you open your position
- Continuous Monitoring - The system monitors price in real-time
- Automatic Trigger - When price hits the threshold, the position closes automatically
- Capital Recovery - Platform recovers its contribution, user loses their stake
Liquidation vs Manual Close
| Aspect | Liquidation | Manual Close |
|---|---|---|
| Exit fee | 0% | 3% |
| Control | Automatic | User-initiated |
| Timing | At threshold | Any time |
| Capital loss | Full user stake | Varies |
Summary
Liquidation is a protective mechanism that automatically closes trades at specified price levels. While you lose your initial capital in a liquidation event, you avoid exit fees and are protected from owing additional funds beyond your original contribution.