Understanding Liquidation in Cross and Isolated Margin Modes on SorooshX

SorooshX implements different liquidation strategies based on whether you’re using cross-margin or isolated-margin mode. These strategies aim to minimize user losses while keeping the platform stable and fair, even during turbulent market conditions.

Cross-Margin Liquidation Explained

In cross-margin mode, your available equity is shared across all positions. Liquidation occurs when your total account equity (excluding isolated-margin balances and their PnL) drops below the combined maintenance margin for all your open futures contracts.

  • Trigger Condition:
    Liquidation is activated when the maintenance margin ratio hits 100%.

  • Calculation:
    The system calculates maintenance margin as:

      Maintenance Margin = Tier-Based Rate × Position Value

In hedged positions, the calculation is based on the side with the greater equity. Position values are determined using the mark price, a fair valuation used to prevent manipulation or volatility-driven errors.

Isolated Margin Liquidation

For isolated margin mode, each position is treated separately. Liquidation is triggered when the sum of your margin and unrealized profits is less than the required maintenance margin.

  • Trigger Condition:
    Maintenance margin ratio = 100%.
  • Auto-Margin Call Support:
    If enabled, SorooshX will automatically transfer margin from your futures wallet to reduce the likelihood of liquidation.

Step-by-Step: Partial Liquidation Process

When risk thresholds are breached, SorooshX uses a multi-stage reduction method to reduce exposure while giving users the chance to recover:

  1. Cancel Orders:
    • In isolated mode: Only pending orders related to the affected position are canceled.
    • In cross-margin mode: All open orders across positions may be canceled, including isolated orders.
  2. Netting in Hedge Mode:
    • Opposite-direction positions (long and short) on the same pair are offset to reduce exposure.
    • This does not apply to isolated margin positions.
  3. Partial Liquidation:
    • The system lowers leverage by one tier.
    • Positions of tier 2 or above will be partially liquidated before full liquidation is considered.
  4. Full Liquidation:
    • If risk persists, the remaining position is closed at the bankruptcy price using the Insurance Fund.
    • For tier-1 accounts with no pending orders, liquidation happens once the margin ratio hits 100%.

Bankruptcy Price:
This is the point where your account balance would fall to zero. It's not visible on standard price charts and is used to calculate the final liquidation.

How the Insurance Fund Works

The SorooshX Insurance Fund is a safety net that absorbs losses from liquidated positions. Here’s how it functions:

  • Profit/Loss Handling:
    If a liquidation results in a profit for the system (e.g., closed at a better price than the bankruptcy level), the fund grows.
    If the liquidation causes a loss, the fund absorbs the hit.
  • When Fund Depletes:
    If the fund is drained (fully or by over 30% from its peak), the Auto-Deleveraging (ADL) mechanism is triggered.

ADL (Auto-Deleveraging): The Last Line of Defense

ADL is a contingency plan that directly reduces exposure by matching trades with profitable counterparties—without placing market orders.

  • How It Works:
    The platform closes your position directly against a counterparty at the bankruptcy price—no slippage, no fees.
  • Who Gets Deleveraged:
    The system ranks all accounts and selects top-performing ones based on return on investment (ROI) and leverage.

How ADL Counterparties Are Chosen

Counterparty risk ranking is based on the ROI of open positions, using the formulas below:

Cross-Margin:

Position ROI = Unrealized PnL ÷ (Position Size × Entry Price) 

Leverage = Total Position Value ÷ (Total Assets + Unrealized PnL) 

Margin Trading ROI = Position ROI × Leverage

Isolated Margin:

Position ROI = Unrealized PnL ÷ (Position Size × Entry Price) 

Leverage = Position Value ÷ (Margin + Unrealized PnL) 

Margin Trading ROI = Position ROI × Leverage

Priority for ADL:

- Accounts with higher ROI and leverage face the greatest risk of being selected for ADL.

- Positions with losses or partial liquidations are excluded from this list (ROI = 0).