🔚Account Health & Liquidations

Find out more about managing your risk.

Estimated Liquidation Prices

Liquidation events occur when a trader's account balance falls below a threshold known as the Maintenance Margin. This event triggers an involuntary process where the trader's open positions are forecefully closed. The primary reason for this action is the insufficient margin within the account to sustain the unrealized losses it has incurred.

It’s important to note that liquidation does not only result in the closure of positions at a probable loss but may also incur additional fees and penalties charged for the liquidation process. Consequently, traders are advised to closely monitor their accounts and employ risk management strategies such as stop-loss orders to prevent such events from occurring.

Caution: Cross-Margin Trading on Kwenta

V3 Perps on Base utilize cross-margin trading, where your equity balance reflects your total account balance. In the event of a liquidation, you risk losing your entire account balance. To mitigate liquidation risks, consider creating isolated sub-accounts for better risk management.

Account Health

Account health in a cross margin environment refers to the current status of a trader's account in terms of its ability to support open positions, considering all positions as part of a combined whole rather than individually.

It's the MOST ACCURATE indication of how close or far an account is from facing a margin call or liquidation based on the available margin versus required maintenance margin. In cross margin mode, the entire account's balance, including any unrealized profits or losses from open positions, serves as collateral for every position, affecting the account's leverage and risk exposure.

Key factors affecting account health in cross margin mode include:

• Total Account Balance: The sum of the initial deposits plus or minus any realized or unrealized profits or losses from open positions.

• Market Volatility: Significant price movements can affect the value of non stable coin collateral, potentially endangering the account health if adverse.

• Open Positions: The size and direction of open positions across various assets can influence account health, especially if the market moves against these positions.

• Margin Requirements: The initial and maintenance margin requirements for all open positions, considering the account's total balance as collateral.

A healthy account status means the trader has sufficient margin to cover potential losses, keeping the risk of liquidation low. Conversely, an unhealthy account status signals that the account is nearing or below the required maintenance margin levels, increasing the risk of liquidation.

Traders must closely monitor their account health, particularly the margin ratio, as it is a precise indicator for the proximity of an account to liquidation.

Kwenta provides indicators to help users manage their account health both in their thier dashboard and on the main futures UI.