Liquidation
The forced closure of a futures position by the broker when account equity falls below margin requirements.
Liquidation in futures occurs when a broker forcibly closes one or more contracts because the account's equity has fallen below the maintenance margin — or in extreme cases, below zero. Unlike stocks, futures brokers typically liquidate immediately at market once the maintenance threshold is breached, without waiting for the trader to meet a margin call.
During fast-moving markets, liquidation can occur at prices far worse than the maintenance threshold — resulting in a negative account balance. The trader is then liable for the deficit. This is the core risk of leveraged futures trading.
Some brokers offer auto-liquidation features that close positions before the exchange minimum is breached, reducing the risk of a deficit but also potentially stopping out profitable setups during brief spikes.
Related Terms
Day-Trading Margin
A reduced intraday margin rate offered by retail brokers for futures positions opened and closed within the same session.
IntermediateInitial Margin
The minimum deposit required to open one futures contract, set by the exchange clearing house (CME, CBOT, NYMEX).
BeginnerLeverage (Futures)
The ratio of a futures contract's full notional exposure to the margin posted, amplifying both gains and losses on the capital committed.
IntermediateMaintenance Margin
The minimum equity level a futures account must maintain; falling below triggers a margin call demanding top-up to initial margin.
BeginnerMark-to-Market
The daily revaluation of open futures positions to the settlement price, with gains and losses settled in cash each session.
Intermediate