Risk

Liquidations

When a position is liquidated, how the fee works, and how to keep your distance.

When you get liquidated

A position is liquidated when its effective equity can no longer cover its maintenance margin. Element measures this with a health index.

health = effective equity / maintenance requirement x 1000
effective equity = collateral + unrealized PnL - funding - borrowing
maintenance requirement = position notional x 0.40%

The health index

Health is on a x1000 scale: 1000 means you are exactly at the maintenance line. A position is liquidatable when health falls below 1000; exactly 1000 is still safe. Liquidation is permissionless, so anyone can trigger it once a position is eligible, and you cannot liquidate your own position. An eligible position is closed in full.

The liquidation fee

When a position is liquidated, a fee of 20% of its remaining equity is taken, capped at the equity so it can never exceed what is left. It is split evenly: half to whoever triggered the liquidation, half to the insurance fund.

The fee comes from remaining equity

The liquidation fee is deducted from what is left in your position, not billed to your wallet. Whatever remains after the fee and your realized loss is returned to you.

Off-hours and fast markets

Markets trade 24/7, so a position can be liquidated while U.S. equity venues are closed. Off-hours the mark can move independently of where the stock would open.

Use lower leverage for a wider buffer
Add margin or set a stop-loss
Watch positions during volatile or off-hours sessions