Glossary
What is Insurance fund
An exchange reserve that covers the loss when a position was liquidated worse than its bankruptcy price; if the reserve runs short, auto-deleveraging steps in.
How it works
Example
A 1 BTC long, bankruptcy price 54,000. The market gapped through and the position closed at 53,800: the $200 loss beyond margin comes out of the fund. If it closed at 54,100, the extra $100 goes into the fund.
Common mistake
Counting on the fund to save your position: it covers the exchange's hole, and your margin is already gone.
Read next
Related terms
Frequently asked questions
- Where can I learn Insurance fund step by step?
- In the Trading OS Academy: “Leverage is sizing, not greed”.
- What is Insurance fund related to?
- Liquidation; Auto-deleveraging (ADL); Bankruptcy price.
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