How does a partial liquidation work in crypto futures?

Definition and Trigger Mechanism

1. A partial liquidation occurs when a trader’s position margin falls below the maintenance margin requirement but remains above the bankruptcy price.

2. The exchange automatically reduces the position size—not fully closing it—to bring the margin ratio back within acceptable limits.

3. This process is executed by the platform’s risk engine in real time, often within milliseconds of the margin breach detection.

4. Unlike full liquidation, no immediate loss of the entire position occurs, preserving some exposure to the underlying asset’s price movement.

5. The reduction amount is calculated based on current leverage, position size, entry price, and mark price at the moment of intervention.

Margin Recovery and Position Adjustment

1. After partial liquidation, the remaining position has a higher effective margin ratio due to the reduced notional value.

2. Unrealized PnL is recalculated based on the new position size and updated mark price, directly affecting available margin.

3. Funding payments continue to apply only to the remaining open contracts, scaled proportionally to the reduced size.

4. Traders retain control over the residual position and may manually adjust or close it without system interference—unless another margin breach occurs.

5. The liquidated portion is settled at the prevailing market price or via internal auction, depending on the exchange’s matching engine design.

Impact on Leverage and Risk Profile

1. Leverage increases for the remaining position if the trader does not add margin, since leverage = position value / equity.

2. The risk of subsequent partial or full liquidation rises significantly if price continues moving against the position.

3. Traders often misinterpret post-liquidation leverage as “safe” when in fact volatility exposure intensifies relative to equity.

4. Stop-loss orders placed before liquidation remain active only on the surviving portion, potentially triggering faster than anticipated.

5. Open interest data reflects the net reduction, influencing market depth perception and slippage expectations for similar-sized orders.

Exchange-Specific Implementation Variations

1. Binance applies partial liquidation on USDⓈ-M futures only when initial margin is ≥ 10x and position size exceeds certain thresholds.

2. Bybit uses a tiered maintenance margin schedule where partial liquidation thresholds shift dynamically with position size.

3. OKX implements auto-deleveraging avoidance by prioritizing partial liquidation across all affected accounts before invoking ADL.

4. Deribit disables partial liquidation entirely on options-based futures, relying solely on full liquidation and margin calls.

5. BitMEX historically avoided partial liquidation, opting instead for immediate full closure—a model later revised under new risk frameworks.

Frequently Asked Questions

Q: Does partial liquidation affect my trading fee tier?Partial liquidation itself does not alter your fee tier; however, reduced trade volume from smaller position sizes may impact tier eligibility over time.

Q: Can I recover the liquidated portion of my position?No. Once executed, the liquidated contracts are permanently closed and cannot be reversed or reinstated—even if price reverses immediately after.

Q: Is the liquidation price displayed in my dashboard updated after a partial liquidation?Yes. The dashboard recalculates and displays a new liquidation price based on the adjusted position size, current equity, and maintenance margin rate.

Q: Do I receive a notification when a partial liquidation occurs?Most major exchanges send real-time email and push notifications; however, latency or disabled alerts may result in delayed awareness.