> For the complete documentation index, see [llms.txt](https://docs.afx.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.afx.xyz/trading-rules/liquidation.md).

# Liquidation

When a trader's margin ratio reaches 100%, the system initiates liquidation to prevent further losses. AFX employs a multi-layered liquidation system designed to minimize the impact on traders while maintaining platform solvency.

## Liquidation Trigger

Liquidation is triggered when:

```
Margin Ratio = Maintenance Margin (MM) / Position Equity = 100%
```

The trigger condition is the same for both Cross and Isolated margin modes, but the Equity calculation differs:

**Isolated Margin:**

```
Position Equity = Position Margin + Isolated Unrealized PNL
              = Initial Margin + Close Fee + Added Margin + Isolated Unrealized PNL
```

**Cross Margin:**

```
Position Equity = Wallet Balance + Cross Unrealized PNL - Isolated Balance (IB)
```

Where IB = total margin locked in isolated positions.

## Margin Ratio Alerts

For users registered with email, the system sends warning notifications at the following thresholds:

| Margin Ratio | Alert                                            |
| ------------ | ------------------------------------------------ |
| 50%          | First warning — add margin recommended           |
| 67%          | Second warning — add margin urgently recommended |
| 100%         | Liquidation triggered                            |

## Liquidation Process

See [Liquidation Process](/trading-rules/liquidation-process.md) for the detailed multi-phase liquidation flow.

## Auto-Deleveraging (ADL)

In extreme market conditions where normal liquidation cannot fully close a position, the Auto-Deleveraging system is activated. See [ADL](/trading-rules/adl.md) for details.

## Estimated Liquidation Price

The estimated liquidation price is displayed on the trading interface for reference. The formulas are:

**Long position:**

```
Liq. Price = (1 - 1/L) × 1/(1 - MMR - feeRate) × Entry Price
```

**Short position:**

```
Liq. Price = (1 + 1/L) × 1/(1 + MMR + feeRate) × Entry Price
```

Where:

* **L** = Effective leverage = Position Value / Equity
* **MMR** = Maintenance Margin Rate (see [Risk Limits](/trading-rules/risk-limits.md))
* **feeRate** = Taker fee rate

The estimated liquidation price is rounded to the tick size (up for longs, down for shorts) and is for reference only — actual liquidation depends on the real-time margin ratio reaching 100%.


---

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