Futures exchange members or customers take advantage of their financial advantages to deliberately raise or lower futures market prices by controlling futures trading positions or monopolizing spot commodities available for delivery, and hold excessive positions and deliver. The act of forcing the counterparty to default or close the position at an unfavorable price to make huge profits. According to different operating techniques, it can be divided into two methods: "long squeeze short" and "short squeeze long".
① Long squeeze short. In some small varieties of futures trading, when market manipulators anticipate that there will be insufficient spot commodities available for delivery, they use their financial advantages to establish sufficient long positions in the futures market to drive up futures prices, and at the same time acquire and hoard large quantities of commodities available for delivery. In kind, the price in the spot market rises at the same time. In this way, when the contract is about to be delivered, the short-selling members and customers will either buy back the futures contract at a high price and admit their losses to close the position; or they can buy the spot goods at a high price and order physical delivery, or even be fined for breach of contract because they cannot deliver the physical goods. In this way, the long positions Position holders will make huge profits from it.
③The short force is long. Market manipulators take advantage of capital or physical goods to sell a large number of certain futures contracts in the futures market, so that their short positions greatly exceed the ability of many parties to undertake physical goods. As a result, the price of the futures market fell sharply, forcing speculative bulls to sell the contracts they held at low prices and admit losses, or to use their financial strength to receive the goods and be fined for breach of contract, thus making huge profits.
When market manipulation occurs, it often causes violent fluctuations in futures prices, causing large losses to small and medium-sized retail investors. In order to avoid greater losses, or the margin has been lost to the minimum level specified by the exchange or brokerage company. And when there is no ability to increase margin. You have to close your position and admit your losses and you are out. This is called liquidation. If the futures price continues to rise and fall in the same direction, even if the customer wants to admit the loss and exit the position, the transaction will not be completed. The customer's loss will further increase. In the end, the margin account will be completely lost or even have a deficit (negative number). When the customer is unable to make additional payments, an overdraft will be formed. When in this state, it is called liquidation or liquidation. Liquidation generally refers to exchanges or futures brokers based on the margin system or position limit system. When a member or client's margin loss reaches a specified level or a client violates the position limit regulations, the member's or client's position is forced to be liquidated. The main purpose is to control transaction risks. When market manipulation occurs, forced liquidation is required. Positions are used by exchanges as a means to reduce huge positions and reduce market risks.
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