How Liquidations Work

What actually happens when a position on BULK gets liquidated, step by step. For the full technical specification, see docs.bulk.trade/bulk-exchange/Liquidations.

When does liquidation trigger?

Two conditions have to both be true:

1. Your account's closeout equity falls below the required maintenance margin (with a safety buffer), and
2. Your position is currently at a loss on a mark-to-market basis.

Closeout equity isn't calculated using the simple current mark price — BULK uses a more conservative "closeout price" estimate that accounts for the cost of actually selling into the order book (sweep impact) and the possibility that other accounts are being liquidated near the same price at the same time (cascade impact). This is deliberately pessimistic: it assumes exiting your position will move the market against you somewhat, rather than assuming a perfectly clean fill.

BULK doesn't close your whole position immediately

This is the part that surprises people coming from exchanges with simple "liquidate everything at once" logic. BULK's process is incremental:

1. Cancel your open orders on the affected position first, so they can't interfere with the recovery process.
2. Calculate a recovery target — how much the position needs to shrink to bring your account back above the maintenance requirement, with a margin of safety.
3. Reduce the position in steps, sized to how severe the shortfall is:
   • Margin gap greater than 30% of the maintenance requirement → reduce the position by 25%.
   • Gap between 10–30% → reduce by 10%.
   • Gap of 10% or less → reduce by 5%.
4. Repeat, re-checking your margin health after each step, for up to 100 iterations.
5. If the account still can't be brought back to health after that, BULK falls back to closing the position entirely.

The intent is to avoid over-liquidating — closing far more of your position than was actually necessary to fix the shortfall — which is a common complaint about cruder "close it all" liquidation engines.

When liquidation still isn't enough

In rare cases, even this incremental process can't fully resolve the situation — either the losses exceeded available collateral, or the position couldn't be reduced fast enough through the market. When that happens, BULK falls through to Auto-Deleveraging. It's enough of a topic on its own to deserve its own page: see Auto-Deleveraging (ADL) for exactly how accounts get selected, how the reduction is priced, and what backstops the protocol's own risk vault provides.

How to avoid it in the first place

• Use lower leverage than the maximum available — the margin buffer above the maintenance requirement is your cushion against normal price volatility.
• Set a stop-loss so you exit on your own terms, at a price and time you choose, rather than via the liquidation engine. See Conditional Orders Playbook for how BULK's Stop orders actually work.
• Remember that portfolio margin can reduce your requirement if you're holding correlated positions, but it doesn't eliminate liquidation risk — a large enough adverse move can still trigger it.

See also

• Understanding Portfolio Margin
• Auto-Deleveraging (ADL)
• Conditional Orders Playbook
• Official ADL documentation

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