PrimeBit allows you to trade with high leverage and you are protected against a negative balance on your account at the same time. When the margin on your account is too low, the position is automatically closed. This process is called a forced liquidation mechanism.
To avoid price manipulation and protect from exaggerated financial losses caused by forced liquidation, PrimeBit pegs the Order Book Prices with Fair Price (an average price from several leading external exchanges).
If the price of BTCUSD at PrimeBit is 10000, but the Fair Price is 11000, you will be able to open a position at the PrimeBit price, but your profit and loss will be calculated using the Fair Price. If the PrimeBit price suddenly drops to 9000, your profit and loss will be still calculated using the Fair Price. However, you will be able to close the position using the PrimeBit price of 9000.
When liquidation cannot be filled by the time the Fair Price reaches the bankruptcy price, the ADL system automatically deleverages opposing traders’ positions by profit and leverage priority.
Profitable position: rank = (Position value at Fair Price - Position value at Open Price) / Position value at Open Price * Position value at Fair Price/abs (Position value at Fair Price - Position value at bankruptcy price)
Losing position: rank = (Position value at Fair Price - Position value at Open Price) / Position value at Open Price / Position value at Fair Price * abs (Position value at Fair Price - Position value at bankruptcy price)
The price at which traders’ positions are closed out is the bankruptcy price of the initial liquidated order (the price that nullifies account balance).
PrimeBit does not liquidate positions at bankruptcy price unless the liquidation would result in a negative balance. It means that PrimeBit does not support the concept of Insurance Fund, which has been employed by most of the crypto exchanges, because it increases losses of highly-leveraged users. At PrimeBit we just make sure that once forced liquidation is initiated, the user is provided with the best price possible.
Users whose positions have been auto deleveraged receive an instant message to the trading platform so they may decide to re-enter. We also provide updates to your platform in the event your position enters/leaves the top percentile of the ADL ranking.