Why Is the Fill Price Different from the Liquidation and Bankruptcy Prices? – LeveX

In leveraged trading, understanding why the fill price can differ from the liquidation and bankruptcy prices is essential for managing risk, avoiding unexpected losses, and making more informed trading decisions. These three values play unique roles in the liquidation process, and knowing how they interact can give you a much clearer view of how positions are closed.

Key Definitions

🔹 Fill Price

The fill price is the actual market price at which your position is closed — either manually or by forced liquidation. It depends on order book liquidity, market conditions, and available counterparties at the time the order is executed.

🔹 Liquidation Price

This is the trigger price at which the platform automatically initiates the liquidation of your position due to insufficient margin. It’s calculated based on your leverage, entry price, margin balance, and maintenance margin requirements.

🔹 Bankruptcy Price

The bankruptcy price is the worst-case scenario: it represents the price at which all of your initial margin is lost, resulting in zero equity for that position.

Why Are These Prices Different?

Let’s dive into the main reasons why you might see discrepancies between your fill price, liquidation price, and bankruptcy price.

1. Market Volatility and Slippage

In fast-moving markets, prices can "gap" or move rapidly between levels. This can cause:

Your liquidation to be triggered at the liquidation price
But the actual order fills at a lower (or higher) price, depending on direction

Example: If you’re long and the market drops sharply past your liquidation price, the system might execute the trade at the next available price, which could be closer to the bankruptcy price.

2. Liquidation Execution Mechanism

Most exchanges use a multi-step liquidation system:

Step 1: Position is flagged for liquidation at the liquidation price
Step 2: The system tries to close your position on the open market, using the best available liquidity
Step 3: If a position is closed at a price worse than the bankruptcy price, the exchange's insurance fund covers the deficit to protect other traders.

This means your fill price will often land between the liquidation and bankruptcy prices, depending on how quickly the market moves and how much liquidity is available.

3. Mark Price vs. Last Price

LeveX uses the mark price — a fair-value price derived from a combination of data sources such as spot exchange prices and moving averages — to calculate liquidations. This mechanism is crucial in maintaining a stable and fair trading environment, especially during high-volatility periods.

Mark Price

A calculated price that reflects the fair market value of an asset.
Helps prevent unfair liquidations due to short-term volatility or market manipulation.
Sourced from multiple spot exchanges and smoothed using a moving average to ensure consistency.

Last Traded Price

The most recent price at which an asset was traded on the platform.
Can be volatile, especially in low-liquidity conditions or during sudden market moves.
Is not used to trigger liquidations, as it may not accurately reflect the broader market.

Liquidations are triggered based on the mark price, not the last traded price. This approach:

Helps protect traders from liquidation due to flash crashes or order book manipulation.
Promotes market fairness by using a more stable pricing method.

Risk Management Tips

Use Lower Leverage: Employing lower leverage reduces the risk of rapid liquidation during volatile market conditions.
Set Stop-Loss Orders: Implementing stop-loss orders can help limit potential losses and prevent positions from reaching liquidation thresholds.
Monitor Positions Regularly: Keeping a close eye on open positions allows for timely adjustments to margin levels or position sizes.

If you need further assistance, feel free to contact our Customer Support at support@levex.com or reach out via Live Chat on the LeveX platform.