What does Liquidation (Margin closeout) mean?
Liquidation(Margin closeout) occurs when a trader no longer has any usable/free margin.
This tends to happen when traders incur losses that significantly reduce their free margin, or when they commit a huge proportion of their free balance to open new positions, resulting in little room to sustain further losses.
How is liquidation (margin closeout) triggered on MT4?
MT4 uses a different logic from the Bybit Mainnet platform when handling liquidation event(s).
Liquidation occurs on your MT4 account once the Margin Level % drops below 100% or when your free margin falls below 0. During liquidation, MT4 will use existing Bid/Ask Prices to close your position(s).
*MT4 does not take into consideration Mark Price/Liquidation Price during liquidations
When Margin Close-out is triggered on MT4, it would be displayed in the following manner.
For traders with multiple open positions, MT4 will close position(s) based on “Largest Loss first” during a margin close-out. If you drop below the Margin Level of 100%, your largest losing position will be closed first, followed by the next largest, and so on until your Margin Level % moves back above the required minimum amount. This is done to protect you from incurring further losses.
Example 1: Liquidation on MT4 with 1 single position
Trader A holds a 1X long position on BTCUSDT
1 Long BTCUSDT - Open at 50,000
Margin = Entry Price X (contract Size/Leverage)
Margin = 50,000 X (1/100) = 500
Current Margin Level %
= Equity/Margin Used
= 1000/500 = 200%
Assuming BID price of BTCUSDT falls to 49,499:
Margin Requirement: 500 (Margin is always calculated based on Initial Open Price)
Equity = Initial Balance +/- Unrealized profit and loss
Equity = 1000 - 501 = 499
New Margin Level % = Current Equity/Margin Used
New Margin Level % = 499/500 = 99.8%
Trader A’s BTCUSDT position was liquidated as his Margin Level % had fallen below 100 %.
Trader A would still be left with a remaining balance of 499 (excluding fees).
Example 2: Liquidation on MT4 with multiple positions
Trader B holds the following Long Positions
1 Long BTCUSDT - Open at 46,000
1 Long ETHUSDT - Open at 4,000
Margin Requirements :
1 Long BTCUSDT - 46,000 X (1/50) = 920
1 Long ETHUSDT - 4,000 X (1/50) = 80
Total Margin Requirements - 920 + 80 = 1,000
Margin Level % = 2,200/1,000 = 220%
Assuming the following:
BID price of BTCUSDT falls to 45,000:
Unrealized P&L = (45,000-46,000) * 1 = -1,000
BID price of ETHUSDT falls to 3,799:
Unrealized P&L = (4,000- 3,799) * 1 = -201
Total Margin Requirement - 1,000
Equity: 2,200 - 1,000 - 201 = 999
New Margin Level % : 999/1,000 = 99.9%
Trader B would be liquidated as his Margin Level % had fallen below 100%.
BTCUSDT - Position is liquidated as this was the “Largest Loss” on the account
ETHUSDT - Position remains open after liquidation
Updated Margin Level % : 999/80 = 1248%