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Margin call
If the equity in a customer's account drops to or below the level of maintenance margin because of adverse price movement, the broker must issue a margin call to restore the customer's equity to the initial level.
— CFTC Glossary
In simple words: If your account drops too far, the broker asks you to top it up.
When a leveragedBorrowed power: control a big position with little money. trade goes against you, your account equity drops. Below the maintenance level, the broker asks for more money, or closes positions.
EU rules for retail CFDsBetting on a price change without owning the asset. also make the provider close positions automatically when your margin gets too lowThe highest and lowest price of the past year.. See Margin.
How a crypto exchange liquidates: the Binance example. These are the steps in Binance's own help pages. Check the live pages, because rules change.
- Liquidation starts when the mark priceFair-value prices exchanges use to avoid manipulation. (a fair price built from several exchanges, not the last trade) hits your liquidation price.
- The system first tries one large order to cut your position. If that is enough, it stops there.
- If a loss is left over, an insurance fundExchange money used to cover losses when liquidations go badly. takes over the position. The fund does not refund your losses.
- If the fund cannot absorb the loss, the exchange may close some winning positions on the other side. This is called Auto-Deleveraging (ADL).
Related
Sources & studies
- CFTC Glossary
- ESMA: ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors
- Binance FAQ: Futures liquidation protocols
- Binance FAQ: Futures insurance funds
- Binance FAQ: Auto-Deleveraging (ADL)
Last checked: 2026-11-04 · Educational, not financial advice.
Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.