Furucombo
FurucomboTwitterYoutube
English
English
  • 🧊Furucombo Introduction
  • Project Mode
    • Create Page
      • DeFi Cube FAQ
      • Utility Cube FAQ
      • Other FAQ
    • Fund Page
    • Lending Dashboard
  • Governance
    • COMBO Token
      • COMBO FAQ
      • COMBO's Utility
      • COMBO Distribution
    • Furucombo Tokenomics
      • For Governors
      • For Builders
      • For Masters
    • Community Vault
  • Using Furucombo
    • Furucombo Tutorials
      • Furucombo on Metis Tutorial
      • Beginner’s Guide
      • Lending Dashboard Tutorial
      • Flashloan Arbitrage Combo
      • Flashloan Troubleshooting
      • Passive Income | Part 1
      • Instantly Swap cTokens on Compound
      • Compound V3 Tutorial
      • Furucombo Fund
      • Fund Manager Setup
      • Token Bridge Tutorial
      • Token Multi-Sender Tutorial
      • Fiat to Crypto on Furucombo Tutorial
      • Leveraged Long Position Tutorial
      • Leveraged Short Position Tutorial
      • De-Leverage Position Tutorial
      • Debt Swap Tutorial
      • Collateral Swap Tutorial
    • DeFi Learn
      • What Is Slippage
      • What Is Liquidation
      • Eight Tips on How to Survive in a BearĀ Market
  • Security
  • Audit Report
  • Bug Bounty Program
  • Dev
    • Furucombo Trevi
    • Collaboration
    • Feature Request
  • Resources
    • Deployed Contracts
    • Brand Assets
  • Social Medias
    • Twitter
    • Blog
    • Youtube
  • Terms and Conditions
    • Risk Disclaimer
Powered by GitBook
On this page
  • Liquidation vs Forced liquidation
  • What causes a forced liquidation?
  • How to avoid getting liquidated?
  • Know how to self-liquidate!
  • How does self-liquidation work?

Was this helpful?

  1. Using Furucombo
  2. DeFi Learn

What Is Liquidation

What does liquidation mean, and how can you avoid getting rekt?

PreviousWhat Is SlippageNextEight Tips on How to Survive in a BearĀ Market

Last updated 11 months ago

Was this helpful?

Liquidation occurs when an investor cannot meet the margin requirement for their leveraged position & the underlying collateral tokens will be converted to pay for the liquidation.

Liquidation vs Forced liquidation

Liquidation:

Means selling collateral for cash, or its equivalents.

Forced liquidation:

Occurs when a trader’s position is closed forcibly by lending protocols as the trader ran out of the initial margin used to open the position.

What causes a forced liquidation?

When the price begins to move against the trader’s expectation (either long or short position), the losses are paid for from the margin provided. If the losses surpass the margin provided, the position gets liquidated.

How to avoid getting liquidated?

1ļøāƒ£ Know the liquidation rules before you open a position.

2ļøāƒ£ Raise your collateral ratio by depositing more collateral or repaying part of your loan. It’s important to monitor your collateral ratio & keep it high enough to avoid liquidation.

3ļøāƒ£ Don’t leverage too much. Leveraged positions are prone to volatile price swings, which may cause a trader’s investment to plunge into a negative balance in a very short time period. Measure how much risk can you afford to take before you open a position.

Know how to self-liquidate!

4ļøāƒ£ Self-liquidation means you repay the loan with the fund generated from the sale of the collateral, and you’ll get the remaining assets at the end of the trading.

How does self-liquidation work?

(using Aave flashloan as an upfront fund)

a) Flashloan fund to repay all debt b) Withdraw all collateral c) Sell collateral to repay flashloan