What is the liquidation algorithm of Euro-Italian Exchange?

The liquidation algorithm is a mechanism to protect user funds. When the margin rate is lower than the threshold or the position value falls below a specific price, Eureka Exchange will automatically close the position. The liquidation algorithm is based on real-time monitoring of positions and margins. It issues a warning before triggering liquidation. Users can increase margins or reduce positions to avoid liquidation. The advantages include protecting user funds, stabilizing the market, and transparency. However, unexpected events cannot be avoided and may limit flexible trading.

European exchange liquidation algorithm

What is the liquidation algorithm?

The Liquidation Algorithm is a mechanism used by Eureka Exchange to protect users’ funds and prevent them from suffering heavy losses due to excessive leverage. When the user's position loss reaches a certain level and reaches or exceeds his margin, Eureka Exchange will automatically close the position, that is, the position will be liquidated.

Triggering conditions of liquidation algorithm

European Exchange’s liquidation algorithm is based on the following triggering conditions:

• Maintenance Margin Ratio (MMR): This is an indicator that measures the relationship between user margin and position value . When the MMR falls below a certain threshold (usually 20%), a liquidation will be triggered.
• Force Liquidation Line (FPL): This is a price level that will trigger a liquidation if the value of a position falls below this level. FPL is usually lower than the MMR trigger price.

The process of liquidation algorithm

The process of liquidation algorithm is as follows:

1. The system continuously monitors each user's position and margin.
2. When MMR or FPL is triggered, the system will issue a liquidation warning to the user.
3. Users can increase margin or reduce positions within a period of time after the warning to avoid liquidation.
4. If the user does not take action within the specified time, the system will automatically close the position, that is, the position will be liquidated.

Advantages of Liquidation Algorithm

European Exchange’s Liquidation Algorithm has the following advantages:

• Protect user funds: Prevent users from suffering huge losses due to excessive leverage.
• Stabilize the market: Reduce extreme market volatility and prevent market crashes.
• Transparency: The trigger conditions for liquidation are public, and users can clearly understand the risk of liquidation.

Limitations of the Liquidation Algorithm

The Liquidation Algorithm of Eureka Exchange also has the following limitations:

• Cannot avoid unexpected events: The algorithm cannot predict unexpected events, such as hacker attacks or market emergencies events, which can cause extreme price swings and trigger liquidations.
• Restrictions on flexible trading: The liquidation algorithm may limit users’ ability to conduct flexible trading in highly volatile markets.

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