Why might futures liquidation occur earlier than expected?
Hello everyone, is there anyone here who is actively trading? I just registered on one of the exchanges a month ago to try to make my first deals, but I still have a lot to learn. I wanted to know if you have ever had liquidations and do you know why they happened? I read quite a few articles on iTrusty.io about trading and am currently studying how liquidation works in futures trading. And it says here that one of the reasons for early liquidation may be that the liquidation is based on the mark price, and not on the last price, which most people focus on. To be honest, I didn’t really understand this point, so I wanted to know from you: do you know what this means?
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Have you noticed that liquidation can happen even if the chart price hasn’t reached your level? I learned that futures use the mark price, not the last traded price, to calculate liquidation. The mark price is a fairer estimate of the asset’s value, based on an index and adjustments, so sudden spikes in the last price don’t trigger liquidations unfairly. When I started trading, I realized that monitoring the mark price instead of the chart price helped me understand why some positions were liquidated earlier than I expected. This approach makes futures trading safer and avoids surprises from temporary price swings.