Liquidation

Liquidation is a crucial element of trading in AMOK; When you open a leveraged position, in essence, what's happening is that your collateral has been used to borrow money from an exchange and then use these funds for when it comes time to purchase assets.

If your position falls, losses approach your initial collateral, which puts the exchange at risk. In a scenario where a sudden price movement takes place, and the value of the asset is too close to the collateral value, the exchange will liquidate your position in order to secure against losses.

For example, if you open a 10x leveraged position using 500 USDC, your total initial position is worth 5,000 USDC—in effect borrowing 4500 USDC of that position's value.

That is why AMOK enforces a so-called maintenance margin of 6.25%.

Using the same example, if the position falls below 4687.5 USDC, it will be liquidated. It is thus evident that 10x leverage is a very high risk.

Difference between Collateral and Margin Collateral are the funds available for trading, while margin is the collateral currently in use within an open position.