1. When trading, if you think it will go up, you need a bullish order, which is called "buy". When it really goes up, you must "sell" this order to make a difference in order to make a profit. At this time, the selling action is called "liquidation".
On the other hand, when you feel that you are going to fall, you need a put list, that is, borrow goods and "sell" first. When it really falls, you can "buy" and "return" to earn the difference. This "buy" action is also called liquidation.
To sum up, when you have an order on hand, all you have to do is "close the position" and complete the whole transaction process before closing the position. The risk of liquidation means that it is difficult for traders to close their positions by hedging. The risk of liquidation, especially futures, shows a continuous unilateral trend, and the risk of liquidation or delivery month is coming soon, which reduces market liquidity. The risk of liquidation makes it impossible for traders to liquidate their positions in time, resulting in heavy losses.
What is compulsory liquidation? Forced liquidation means that when the trading margin of members or customers of a futures exchange is insufficient and not replenished within the specified time, or when the positions of members or customers exceed the specified limit, or when members or customers violate the rules, the exchange implements forced liquidation to prevent the risk from further expanding. The compulsory liquidation system is a risk management system that cooperates with the position limit system and the price limit system. When the trading margin of exchange members or customers is insufficient and not replenished within the specified time, or when the positions of members or customers exceed the specified limit, or when members or customers violate the rules, the exchange will forcibly close the open positions held by them in order to prevent the risk from further expanding. This is the compulsory closing system.
Why is it compulsory liquidation? When the balance of the member's settlement reserve is less than zero, the forced liquidation that has not been replenished within the specified time can be divided into three situations: first, when only the self-operated account defaults, the positions of the self-operated account are forced to be closed in the order of the total positions in the contract. If the settlement reserve is still less than zero after the forced liquidation, the investors in their agency accounts will be moved; Second, when only the brokerage account defaults, it will be compensated by the balance of settlement reserve and the liquidation amount of the self-operated account, and then the position in the brokerage account will be leveled according to certain principles; Third, when both the proprietary account and the brokerage account default, the order of forced liquidation is proprietary account first, then brokerage account. If the settlement reserve is greater than zero after forcibly closing the brokerage account position, investors will be passive.