> ## Documentation Index
> Fetch the complete documentation index at: https://docs.priest.trade/llms.txt
> Use this file to discover all available pages before exploring further.

# Liquidations

> A liquidation happens when a position runs out of margin. If your losses get too close to your deposited collateral, the protocol closes ...

A liquidation happens when a position runs out of margin. If your losses get too close to your deposited collateral, the protocol closes your trade to prevent you from going into negative balance.

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## When does liquidation happen?

Your position gets liquidated when your **Margin Ratio** drops below the **Maintenance Margin** requirement:

* At **40x leverage**, your maintenance margin is **1.25%**.
* That means if your remaining equity (collateral plus unrealized PnL minus owed funding) drops to 1.25% of your position's total value, your position is liquidated.

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## Protection against wick liquidations

On volatile meme coins, sudden flash wicks on one exchange or pool can wipe people out unfairly.

Priest.trade uses a **dual-price check** to stop this:

* Your position is only liquidated if your margin ratio is breached at **both the mark price AND the index price** (the smoothed moving average).
* If someone pumps or dumps the price for a single block, the smoothed index barely moves, and the liquidation transaction reverts. You stay in your trade.

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## What happens during a liquidation

When a position is liquidated:

1. The position is closed at the market price through the curve or secondary engine.
2. Any remaining equity is split:
   * A trading fee is deducted.
   * A small reward goes to the keeper bot that executed the liquidation.
   * A penalty goes to the market's insurance fund.
   * Whatever is left over goes back to your wallet.
3. If the position closed with negative equity (a gap down past zero), the market's insurance fund absorbs the loss.

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## How to avoid getting liquidated

* **Use Stop Losses:** Set an automatic stop loss on your trade so you exit before reaching maintenance margin.
* **Add Margin:** If a trade is moving against you, click the `+` icon next to your position to add more USDC collateral. This moves your liquidation price farther away.
* **Trade with Lower Leverage:** High leverage leaves almost no room for error. A 10x position gives you a \~9% buffer, while 40x gives you only \~1.25%.

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## See also

* [Leverage & Margin](https://docs.priest.trade/core-concepts/leverage-and-margin.md) — how margin requirements are calculated.
* [Take Profit & Stop Loss](https://docs.priest.trade/trading/tp-sl-orders.md) — setting automated exits.
* [Insurance Fund](https://docs.priest.trade/core-concepts/insurance-fund.md) — what covers bad debt.


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