In contract trading, some users may encounter situations where "a stop-loss is set, but the position is still forcibly liquidated". This is not a system anomaly. It is mainly caused by the dual-price mechanism, insufficient market liquidity, incorrect stop-loss placement, missed limit order fills due to slippage, and the highest-priority rule of liquidation risk control.
This article explains four common liquidation scenarios and provides corresponding risk prevention recommendations.
Core Rule: Dual-Price Mechanism
The platform adopts two price systems with different execution logics:
Liquidation Benchmark: Mark Price
Calculated as a weighted average of prices from multiple major spot exchanges across the market. It prevents abnormal liquidations caused by malicious manipulation of a single order book, and is the sole benchmark for the liquidation system.
Stop-Loss Trigger: Last Price
All platform Take Profit / Stop Loss (TP/SL) orders are triggered by the latest executed price of the contract order book.
Scenario 1: Market Stop-Loss Triggered, But Position Fully / Partially Liquidated
Core Causes
Insufficient stop-loss buffer; liquidation takes priority
TP/SL orders are conditional orders. After the trigger price is reached, the system requires time to generate a closing order. If the gap between the stop-loss price and liquidation price is too narrow, the price may hit the liquidation line before the stop-loss order is generated during extreme market moves. Since liquidation risk control has higher priority than regular orders, the liquidation engine will take over the position directly, preventing the stop-loss order from being submitted.
Insufficient market depth leads to partial fill; remaining position gets liquidated
A market stop-loss is filled across order book tiers by depth once triggered. However, during extreme volatility with thin order book liquidity, partial fills or failed order placements may occur. The unfilled portion of the order will be automatically canceled. If the price continues to move against the remaining open position and hits the liquidation price, forced liquidation will be executed.
Status Display: The stop-loss order shows "Triggered" with the result "Partially Filled" or "Order Failed"; the remaining position is subsequently taken over by the liquidation system.
Typical Example
- Position: LAB cross-margin long, 6x leverage, liquidation price ~4.64 USDT, position size 188 LAB
- Setting: Market stop-loss trigger price at 4.70 USDT
- Market: Sharp short-term drop with 4.39% amplitude and severely thin buy-side order book depth
- Outcome: Stop-loss triggered successfully, but only 80 LAB were filled based on current order book depth. The remaining 108 LAB were unfilled and the order was automatically canceled. As the price continued to fall, the remaining position was forcibly liquidated at 4.64 USDT.
Execution Flow
Last price hits stop-loss trigger → Stop-loss condition activated → Market order filled across order book tiers → Partial fill occurs, unfilled portion auto-canceled → Remaining position continues to be exposed to price movement → Price hits liquidation line → Remaining position enters liquidation process
Scenario 2: Limit Stop-Loss Triggered, But Limit Order Unfilled; Position Loses Until Liquidation
Core Cause
Limit TP/SL orders are conditional limit orders. When the last price reaches the trigger price, the system places a closing order at your preset limit price, instead of filling immediately at market price.
During severe volatility with rapid price action, the market price may break below (for long positions) or above (for short positions) your set limit level the very moment the stop-loss triggers. In this case, the limit closing order cannot be matched. The stop-loss is not effectively executed, and the position remains open with floating losses until the price hits the liquidation line.
Typical Example
- Position: BTCUSDT perpetual contract long, liquidation price 64,000 USDT
- Setting: Limit stop-loss trigger at 65,000 USDT, closing limit price at 64,800 USDT
- Market: Sudden sharp drop, price fell directly from 65,100 USDT to 64,500 USDT in a short time, piercing the 64,800 USDT level instantly
- Outcome: Stop-loss condition triggered successfully, and the system placed a limit closing order at 64,800 USDT. However, the market price had already fallen below this level with no matching buy orders, so the stop-loss did not take effect. The position continued to lose value and was finally forcibly liquidated at 64,000 USDT.
Execution Flow
Last price hits stop-loss trigger → Stop-loss condition activated → System places corresponding limit closing order → Market price breaks through the limit rapidly, no counterparty fill → Limit order remains pending and unfilled → Price continues to move and hits liquidation line → Position is forcibly liquidated, corresponding limit stop-loss canceled simultaneously
Scenario 3: Stop-Loss Price Set Beyond the Liquidation Price
Core Cause
A stop-loss order only takes effect when placed on the safe side of the liquidation price:
- For long positions: The liquidation line is below the entry price; the stop-loss price must be above the liquidation price.
- For short positions: The liquidation line is above the entry price; the stop-loss price must be below the liquidation price.
If the stop-loss is set on the wrong side of the liquidation line, the liquidation process will trigger first as the price moves against the position. After the position is liquidated, the corresponding stop-loss order loses its underlying position and is automatically canceled by the system — it will never be triggered.
Typical Example
- Position: BTCUSDT perpetual contract long, mark price liquidation line at 65,000 USDT
- Setting: Market stop-loss trigger at 59,990 USDT (below liquidation price)
- Outcome: As the market fell, the price hit 65,000 USDT first and triggered liquidation. The 59,990 USDT stop-loss was never triggered and was canceled by the system after liquidation.
Execution Flow
Price moves against position → Hits liquidation price first → Liquidation system closes the entire position → Misplaced stop-loss order is automatically canceled as the position no longer exists
Scenario 4: Last Price Does Not Reach Stop-Loss, Mark Price Hits Liquidation First
Core Cause
During extreme market conditions, spot prices across the market fluctuate sharply, causing the mark price (fair price) to move rapidly. However, due to large support walls, liquidity gaps and other factors in the contract order book, the latest executed price may lag behind the mark price.
Since stop-loss is only triggered by the last price, when the mark price has already hit the liquidation line and initiated liquidation, the stop-loss trigger condition has not yet been met. Once the position enters the liquidation process, untriggered stop-loss orders will be automatically canceled.
Typical Example
- Position: SOL cross-margin long, 20x leverage, mark price liquidation line at 143.00 USDT
- Setting: Market stop-loss trigger (last price) at 144.00 USDT
- Market: Sudden crash in the spot market; mark price dropped to 143.00 USDT instantly. However, due to large buy walls in the contract order book, the lowest last price only reached 144.10 USDT.
- Outcome: Mark price hit the liquidation line and the position was liquidated. The last price never reached the stop-loss level, so the stop-loss order was not triggered and was eventually canceled along with the liquidation.
Execution Flow
Spot market crashes → Mark price drops to liquidation line → Contract last price lags behind, does not reach stop-loss → Liquidation system takes over the position → Untriggered stop-loss order is forcibly canceled
Platform Contract Closing & Risk Control Rules
- Order Conflict Rule: When limit closing orders and TP/SL orders exist for the same position, the principle of "first triggered, first filled; others auto-canceled" applies. Once any order is fully filled, all other related pending orders become invalid automatically.
- Highest Priority of Risk Control: Liquidation risk control takes priority over all regular user orders. Once the mark price hits the liquidation line, all pending and processing stop-loss orders will be forcibly terminated.
- Market Stop-Loss Fill Rule: A market stop-loss is filled across order book tiers by depth once triggered. Partial fills may occur in extreme market conditions; the unfilled portion is automatically canceled, and the remaining position will be liquidated if the price hits the liquidation line.
Risk Prevention Guidelines
To reduce the risk of stop-loss failure during extreme market conditions, please follow these rules:
Set Stop-Loss Correctly
- Long positions: Stop-loss trigger price must be above the liquidation price
- Short positions: Stop-loss trigger price must be below the liquidation price
Maintain Sufficient Safety Buffer
Set a buffer between the stop-loss and liquidation price based on the token's liquidity, to cover risks from price volatility and fill delay:
Major coins (BTC, ETH, etc.): Recommended buffer of at least 1%
Example: For a long position with liquidation price at 65,000 USDT, set the stop-loss trigger at no less than 65,650 USDT
- Non-major coins / altcoins: Recommended buffer of 2%~5% or more. The higher the intraday volatility and the lower the liquidity, the wider the buffer required to avoid partial fill risk.
Choose the Right Stop-Loss Type
If prioritizing fill probability, select market TP/SL orders, which have higher fill priority than limit orders.
If using limit TP/SL, leave a more sufficient price buffer above your expected fill level to avoid missed fills caused by rapid price moves.
Control Leverage & Position Size Properly
High leverage greatly narrows the price range between stop-loss and liquidation. It is recommended to reduce leverage appropriately and maintain sufficient available margin in your account to improve volatility resistance.