Introduction

This article explains what the Insurance Fund is and how it protects both losing and winning traders on Coinlocally Futures. The Insurance Fund ensures that traders never end up with a negative balance and that profitable traders always receive the full amount they are owed, even during extreme market volatility.

What the Insurance Fund Does

The Insurance Fund prevents losing traders’ balances from dropping below zero and guarantees that winning traders receive their profits. It acts as a safety buffer when the system cannot liquidate a position in time due to rapid price movements or low liquidity.

For example:

• Alice opens a 10x leveraged BNB long position with $2,000 collateral.
• If the market drops too quickly and her position cannot be closed at the expected liquidation price, her losses may exceed her collateral.
• In such cases, the Insurance Fund covers the deficit so that the counterparty (Bob) still receives his profit.

In normal market conditions, the Insurance Fund grows as liquidation fees are collected from traders whose positions close before reaching negative equity.

How Insurance Funds Work

1. When a trader becomes bankrupt

A trader is considered bankrupt when:

• Their collateral falls below the maintenance margin, and
• Their remaining balance after liquidation is below 0 USDT.

In this situation, Coinlocally takes over the trader’s remaining positions.

2. How the Insurance Fund is used

• The Insurance Fund absorbs the bankrupt trader’s negative balance.
• Coinlocally gradually offloads the taken-over positions back into the market.
• Liquidation fees from non‑bankrupt liquidations are added to the Insurance Fund.

3. What happens if the Insurance Fund cannot cover the loss?

If the Insurance Fund cannot accept the positions, counterparty-liquidation may occur, where profitable traders’ positions are partially reduced to maintain system stability. This is rare and typically only happens during extreme volatility.

How to view the Insurance Fund

You can check the Insurance Fund and other trading rules here:

https://futures.coinlocally.com/en_US/futuresData

Additional notes

• The liquidation price shown on the order page is for reference only and may change due to market conditions.
• Actual liquidation depends on real-time price movements and platform execution.
• A portion of the Insurance Clearance Fee from liquidated positions is added to the Insurance Fund.
• You can see these entries in your Transaction History under “Insurance Clearance.”

Common Issues

• Rapid price movements may cause liquidation to occur at a different price than expected.
• Low liquidity can delay liquidation, increasing reliance on the Insurance Fund.
• Not monitoring your LTV ratio may lead to unexpected liquidation.

Feeling lost?

If you’re unsure how the Insurance Fund affects your trades or want help understanding liquidation mechanics, our support team is available 24/7. Reach out anytime and we’ll walk you through everything clearly and confidently.

Updated on: 01/18/2026