What Is ‘Partial Liquidation’ and How Does It Help Preserve the Spread?
Partial liquidation is a process where only a portion of a trader's leveraged position is closed to bring the margin level back above the maintenance margin requirement. By only liquidating a small part, it reduces the overall market impact compared to a full liquidation.
This preserves the spread by reducing the chance of significant slippage that could push the execution price below the bankruptcy price, thus protecting the insurance fund.
Glossar
Partial
Fraction ⎊ In cryptocurrency derivatives, a fraction denotes a proportional share of an underlying asset or contract, frequently encountered within collateralized debt obligations (CDOs) or tokenized real-world assets.
Partial Liquidation
Trigger ⎊ Partial liquidation in cryptocurrency derivatives represents a margin call event where a portion of a leveraged position is forcibly closed to limit further losses, initiated when the account equity falls below a predetermined maintenance margin level.