Follow me today in this post to understand how this can be possible
Already when you trade on Binance Futures and you open a long position, you must note that you are buying a contract from another trader and from Binance.
If the market were to fall, you would be at a loss and the other trader would be in profit and you would be liquidated, but if the system fails to liquidate you due to high volatility, the insurance fund will be triggered to cover the losses and also to ensure that the other trader can realize their gains
🌐 𝐓𝐡𝐞 𝐢𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐟𝐮𝐧𝐝: it allows to cover the positions of traders so that their balances do not go negative. What you need to know is that when you are liquidated, the liquidation fees go into the insurance fund which allows using the guarantees of liquidated traders to cover the losses of bankrupt accounts...
Now you're going to ask me what this has to do with what I wrote above, I'm getting to that...
When the insurance funds can no longer cover the losses of bankrupt accounts, then 𝐀𝐮𝐭𝐨-𝐥𝐢𝐯𝐞𝐫𝐚𝐭𝐢𝐨𝐧 is triggered
✅ 𝐀𝐮𝐭𝐨-𝐥𝐢𝐯𝐞𝐫𝐚𝐭𝐢𝐨𝐧 If the insurance funds can no longer function, which is unlikely. The positions of winning traders will be closed so that we can cover the losing positions...
👉 𝐇𝐨𝐰 𝐝𝐨𝐞𝐬 𝐭𝐡𝐢𝐬 𝐰𝐨𝐫𝐤???
It's simple, we take the position of the winning trader, either we reduce it or we completely close the position, the criteria are:
When the position has a huge leverage effect, we close it
or when the position is in huge profit
For this to happen, the platform will send you a message beforehand
So know that your position can be liquidated even if you are in profit and I remind you that it is very unlikely that we encounter this... but it can happen during a very volatile market or one that lacks enough liquidity
Have you ever faced a problem like this?
If this post was helpful to you, share it so that others can benefit and so that they are not surprised when they find themselves in the situation...
Here's an image that illustrates a bit of what I'm talking about
