What Is the Difference between Partial and Full Liquidation in Crypto Derivatives?
Partial liquidation is a system where only a portion of a trader's leveraged position is closed to bring the margin level back above the maintenance requirement. This allows the trader to retain some of their position.
Full liquidation, conversely, involves closing the entire position when the margin level is extremely low or when partial liquidation fails to restore the required margin. Partial liquidation is generally preferred as it is less disruptive.
Glossar
Full Liquidation
Resolution ⎊ The concept of full liquidation, particularly within cryptocurrency derivatives and options trading, signifies the definitive closure of a position, resulting in the complete offset of obligations and the return of any remaining collateral.
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.
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.