What happens to Open Orders when a Position is liquidated?

When a position is liquidated on Delta Exchange, all open orders of that contract are cancelled. Open Orders and Positions for other contracts are not affected and those orders remain untouched.

Why does this happen?

All Orders on Delta Exchange are traded on Isolated Margin. Isolated Margin is the margin that is dedicated to just a single position irrespective of portfolio margin. Through Isolated Margin, the most a trader can lose in a trade is the margin put up for that trade only. Click here to know more about Isolated Margin. Similarly, all open orders too have dedicated margin. But to keep margin requirement low or improve capital usage efficiency for traders, we provide margin offsetting. If a trader places an order which will close an open position, no margin is charged for it. While closing a position, the margin requirement for the open orders on that contract may change because some of the benefits of margin offsetting may go away. Delta can potentially do one of the three things:

1. Draw more margin from the trader’s available balance to support the new margin requirement.

2. Cancel some of the open orders to reduce the margin requirement.

3. Cancel all the open orders.

We have chosen the third option because we don’t want to make decisions on behalf of traders.

A scenario of a position getting liquidated and all Open Orders being cancelled

Bob has entered into a long position on BTCUSD at $8000 using 50x leverage. The liquidation price for this position is $7882. The price has fallen to $7881 and Liquidation Engine has taken over the position and tries to close the position at the best price possible. At this point, if Bob has placed multiple open orders on BTCUSD, those open order will be cancelled. Thus, even though Bob has placed an open buy order at $7880 in the order books, the order will be cancelled due to liquidation. The reason Open Orders on other contracts is not cancelled is that on Delta Exchange traders use Isolated Margin instead of Cross Margin.