Forced liquidation refers to the trading behavior that one party uses the advantage of capital or warehouse receipt to guide the market to move unilaterally, resulting in the other party's continuous losses, and finally has to cut its position. Generally, it can be divided into two forms: multi-forced wind and multi-forced wind. Forced liquidation is a kind of market manipulation, mainly by manipulating the spot market and futures market to force opponents to submit, so as to achieve the purpose of profiteering.

It is illegal to hold a position by force. In the United States, forced liquidation generally occurs when the deliverable spot quantity is not large. It is the buyers in the market who are forced to close their positions. They have both a large number of spot positions and a large number of future positions, which makes the empty parties or sellers who have no spot can only close their positions at a higher price after entering the delivery, and the futures price will generally deviate far from the spot price. This is called forced position. Forced positions can be roughly divided into two ways, one is to be long and the other is to be short.

Too many short positions: market manipulators use the advantages of funds or physical objects to sell a large number of futures contracts in the futures market, which greatly exceeds the ability of many parties to undertake physical objects. As a result, the futures market price has fallen sharply, forcing speculative bulls to sell contracts at low prices and admit losses, or be fined for breach of contract because of their financial strength, thus making huge profits.

Short positions: In some small varieties of futures trading, when market manipulators expect that the spot commodities available for delivery are insufficient, they will build enough long positions in the futures market by virtue of their financial advantages to raise the futures price, and at the same time buy and hoard a large number of physical objects available for delivery, so the prices in the spot market will rise at the same time. In this way, when the contract is close to delivery, short members and customers are forced to buy back futures contracts at high prices to claim for liquidation; Either buy the spot at a high price for physical delivery, or even be fined for breach of contract for not handing over the physical goods, so that long positions can make huge profits from it.

way

Multiple short positions are not uncommon in the early stage of domestic futures market development. The rubber "R608 incident" of Hainan Merchants Exchange 1996 is an example. The difference is that this strong warehouse event did not happen when the spot available for delivery was not large, but occurred during the period when the spot supply was sufficient. Every August, the domestic natural rubber supply entered the peak season.

Then, in such a spot background, why are there conditions to forcibly open positions? The main reason was that the delivery system was not perfect at that time, and the delivery volume was artificially limited, which limited the delivery volume of members. Whether you can enter the delivery depends on the opening order of futures positions. Forced sellers often occupy the delivery positions of members by dividing positions, thus restricting other sellers from making spot delivery, and at the same time buying in large quantities in the futures market, resulting in a serious imbalance in market buying and selling power and a sharp rise in prices. This is the domestic way of forcing positions.