When a position's collateral ratio falls below the collateral ratio maintenance requirement (i.e. 7.5%), such position will be liquidated automatically by liquidation bots. Hence it's very important to make sure your position is above the maintenance level.
When a position is liquidated, 10% of the residual value of the collateral will be transferred to the liquidation bots as rewards and 90% will be transferred to the Insurance Fund.
At Tribe3, liquidations could occur at vAMM Price or Oracle Price depending on the spread between the vAMM Price and the Oracle Price ("vAMM Oracle Price Gap"). Under normal circumstances where the vAMM Oracle Price Gap is smaller or equal to 10% on an absolute basis, liquidations occur at vAMM Price. However, in the unlikely event that the vAMM Oracle Price Gap is bigger than 10% on an absolute basis, liquidations occur at Oracle Price (i.e. leverage ratio and current margin ratio calculated using Oracle Price will be used to test for maintenance margin ratio compliance). This construct ensures that
- 1.Liquidations occur in a timely manner when vAMM Price severely lags Oracle price and
- 2.Users will not be unfairly liquidated due to vAMM price manipulation
Trading futures could be risky, especially when leverage is applied or when shorting. To minimise your liquidation risk, you should:
- Choose an appropriate leverage level - the higher the leverage, the more likely a position will be liquidated, especially in a volatile market
- Do your own research before trading - understand the risk associated with the trade (e.g. underlying collection, collateral pledged, leverage applied etc.)
- Monitor your collateral ratio closely - cut loss or increase margin when the collateral ratio approaches maintenance collateral ratio (i.e. 7.5%)