One picture to understand the difference between liquidation, closing, and short selling! A brother asked, who took the money from the contract liquidation? Let me briefly explain: 🔺 The funding fee for perpetual contracts belongs entirely to the counterparty. 🔺 The loss of the main part of the margin (principal) before the liquidation is earned by the counterparty. 🔺 The additional losses incurred during liquidation are attributed to the platform. Under the market trend, the platform earns this part of the money; When there is a one-sided market trend, the platform may lose more and even give money back to the opponent. However, now the platform has ADL mechanism, which will forcibly close positions to avoid large losses. 🔺 All transaction fees will be paid to the platform, and a portion will be given to market makers (in the form of discounts) by the platform. 🔺 Exchanges do not take the initiative to act as counterparties, and market makers are always market makers rather than platform reserves. Below is an extension of the relevant basic knowledge of science popularization: 1. Fund rate The anchor of a perpetual contract is the corresponding spot, and in order to keep the contract price close to the spot price, the exchange will adjust it through funding rates. The payment rules for the fund rate are as follows: if the fund rate is positive, long users need to pay short users; If it is negative, the short selling user pays the long selling user. The payment cycle is usually once every 8 hours. The calculation formula for the specific payment amount is: Payment amount=Transaction amount (purchase principal x leverage ratio) x Fund fee rate 2. Leverage Many beginners are prone to liquidation when playing contracts, and the most direct reason is leverage. Leverage amplifies the returns and risks of trading, thereby stimulating greed in human nature. The leverage ratio of the contract can be set between 1 and 125 times. Taking 100 times leverage as an example, this means that as long as the price fluctuates by 1 point, the return can be doubled. Therefore, many people, after losing money under low leverage, cannot resist increasing leverage, ultimately leading to liquidation. So, controlling the leverage ratio reasonably is the key to avoiding liquidation. 3. Handling fees Taking a certain An exchange as an example, the rules for collecting contract fees without discounts are as follows: The handling fee for dining orders (i.e. orders that have already been placed for direct transactions) is 0.05%; The handling fee for placing orders (i.e. orders placed in advance waiting for completion) is 0.02%. The handling fee is charged in both directions, whether it is buying or selling, a handling fee will be charged. The specific calculation formula is: Transaction fee=Transaction amount (principal x leverage ratio) x Transaction fee rate 4. Warehouse explosion A liquidation refers to the platform automatically closing positions when the price reaches the forced liquidation price set by the user. When a position is liquidated, a high handling fee will be charged. Therefore, it is recommended that users set their own stop loss price (preferably keeping a certain margin from the forced liquidation price) to avoid being forcibly liquidated due to market manipulation.