Leverage, Margin Level and Forced Liquidation

VSTAR takes market risk factors into consideration, and the maximum leverage of different products are different. When you choose to increase your leverage level, the system will prompt you that the chose level is too high. Please note that you should select the leverage ratio (and meet the initial margin requirements) before opening a position, otherwise the leverage ratio will be pre-set to the default leverage of the product. The leverage standards and risk warning standards of the main products are
as follows:

What is the margin level?

Margin level refers to the amount of margin a trader can use to open more positions. Expressed as a percentage, it is the ratio of capital to used margin. When it drops to 100%, it means that all available margin has been used and no more trading positions can be opened. The calculation method is as follows:

Margin Level = Equity / Margin * 100%.

When the net asset value of the account goes lower than the mandatory liquidation level of 30%, VSTAR will start cancelling your pending orders or liquidate your positions according to market conditions until the account net asset value is greater than the mandatory liquidation level.

What is forced liquidation?

When the margin-to-equity ratio of one or more positions in the account reaches a certain ratio, that is, the margin level is equal to or less than 30%, the position will be forced to close. This is commonly referred to as " stop out " , " cutting out " , " being liquidated " or " automatically liquidating a position" .

1. Why does " forced liquidation " occur?

Liquidation is done to minimize losses on your account as you do not have sufficient margin to back your open positions.

2. Are there any measures to avoid " forced liquidation " in VSTAR?

Usually, the situation of " forced liquidation " can be avoided by the following two methods:

• Margin call: In VSTAR, when the ratio of your equity to the required margin is 30 %, we will send you a margin call alert on your account and you can deposit more funds to increase the margin.
• Close part of the position in order to increase the available margin. In order to reduce the risk of your account, we strongly recommend that you maintain your margin account level above 100 %.

3. How do traders prevent " margin call " and " forced liquidation?

A good way to control losses and avoid margin calls and constraints is to place stop losses on your trading account.
A stop loss will automatically close your trade at a predetermined level of your choice. You can set it as a percentage below or above the current market price; For example, 20 % below the current market price.

• The opening time of the trading symbol
• What is a market order and a limit order, and how to place an order?
• What is a market order and a limit order, and how to place an order?

There are two main types of orders when trading financial derivatives: market orders and limit orders. A market order is an order to buy or sell an asset immediately at the market's current price, while a limit order is an order to be executed when a specific price or better is reached. Let's understand how these two types of orders work, and how to place market and limit orders in VSTAR.