Liquidation and the Position Risk Indicator
Because you're borrowing crypto from Coinmerce, your position needs to stay sufficiently backed by collateral. If the price moves too far against you, Coinmerce will automatically close your position to make sure the loan can be repaid. This is called liquidation.
The Position Risk Indicator
The Position Risk Indicator shows how close your position is to liquidation. It's displayed in your Margin Account as one of three levels:
Level | What it means |
🟢 Low | Plenty of buffer. Adverse moves are well within your collateral. |
🟡 Medium | The price has moved against you. You should monitor closely. |
🔴 High | You're close to liquidation. Consider closing voluntarily. |
The indicator updates in real time as the asset's price changes.
What triggers liquidation?
Liquidation happens when the price of the asset you've shorted rises far enough that buying it back would consume substantially all of your collateral.
In a 1× short, this requires a significant adverse move. In volatile crypto markets, "significant" doesn't mean impossible. The exact liquidation price is shown on the trade confirmation screen and in your Margin Account.
What happens during liquidation?
Coinmerce automatically buys back the borrowed crypto at the current market price.
Your position is closed.
The closing fee, liquidation fee (2.00%), and any accrued borrowing fees are deducted.
Any remaining balance is returned to your main account.
In severe price gaps, the remaining balance may be zero, but it will never be negative. Your maximum loss is always limited to the collateral you deposited.
Notifications are a courtesy, not a safety net
Coinmerce will attempt to send you a push notification when your Position Risk Indicator turns Medium or High, but you should not rely on it.
Crypto markets move fast, especially during news events.
Push notifications can be delayed or fail silently.
A sudden price spike can move through risk levels in seconds.
You are responsible for monitoring your positions. Treat notifications as a helpful nudge, not a guaranteed warning.
How to reduce liquidation risk
Close before the indicator goes High. A small voluntary loss is almost always better than a forced liquidation with the 2% liquidation fee and unfavourable spread.
Watch the calendar. Major events (Fed decisions, ETF news, regulatory announcements) can spike prices fast. Consider closing before known catalysts.
Monitor actively. Spot Margin is not a "set and forget" product. If you can't check your position for a stretch of time (long flight, holiday with no signal), close it first.
Remember, you can't add collateral after opening. If a position is going against you, your only options are to hold or to close. Plan your exit before you open.
A note on "short squeezes"
A short squeeze is a rapid upward price move driven in part by short sellers being forced to buy back. Each forced buyback adds buying pressure, pushing prices higher and triggering more liquidations. This is the single biggest risk in short selling. Be especially careful with assets in active news cycles or social media-driven momentum.