Hedging liquidation refers to the liquidation of futures contracts previously sold or bought by futures investment enterprises by buying them on the same futures exchange and selling them in the same delivery month. The so-called forced liquidation refers to the forced liquidation of the holder's position by a third party other than the holder (futures exchange or futures brokerage company, such as the trading platform of Fuhui Global Gold Exchange), also known as liquidation or liquidation.
There are many reasons for compulsory liquidation in futures trading, such as customers' failure to add trading margin in time, violation of trading position restrictions, temporary changes in policies or trading rules, etc. In the standardized futures market, the most common is forced liquidation due to insufficient trading margin of customers. Specifically, it refers to the behavior of futures companies to forcibly close some or all of their customers' positions in order to avoid losses. When the trading margin required by the customer's position contract is insufficient, the futures company fails to add the corresponding margin in time or actively reduce the position according to the notice of the futures company, and the market situation is still developing in an unfavorable direction, the obtained funds will be used to fill the margin gap.
The difference between hedging liquidation and forced liquidation
In the course of trading, the futures exchange takes compulsory liquidation measures according to regulations, and the losses caused by liquidation shall be borne by members or customers. The realized liquidation profit belongs to the futures exchange's forced liquidation due to the violation of members or customers, which is included in the non-operating income of the futures exchange and is not distributed to the violating members or customers; If you are forced to close your position due to changes in national policies, continuous price fluctuations, etc., distribute it to members or customers.