> For clean Markdown of any page, append .md to the page URL.
> For a complete documentation index, see https://docs.paradex.trade/risk/overview/llms.txt.
> For AI client integration (Claude Code, Cursor, etc.), connect to the MCP server at https://docs.paradex.trade/_mcp/server.

# Risk & Liquidations

Paradex employs a comprehensive risk management framework designed to protect both individual traders and the overall platform. The system combines real-time margin monitoring, partial liquidations, and an insurance fund to minimize losses while maintaining fair and orderly markets.

#### [Cross, Isolated & Portfolio Margin](/risk/margin-system)

Choose between Cross Margin (shared across all positions), Isolated Margin (per-position), and Portfolio Margin (portfolio-level risk evaluation) modes to match your strategy.

#### [Partial Liquidations](/risk/liquidations)

Paradex uses partial liquidation to minimize impact on your assets, reducing positions incrementally rather than closing everything at once.

#### [Insurance Fund](/risk/liquidations#insurance-fund)

A backstop fund that absorbs losses from liquidated positions, protecting the broader market from socialized losses.

## Margin & Risk Framework

#### [Margin Term Reference](/risk/margin-term-reference)

Detailed definitions of Account Value, Free Balance, Margin Ratio, and all key risk metrics used across the platform.

#### [Risk Checks](/risk/paradex-risk-checks)

Learn about the periodic health checks, initial margin validation, and maintenance margin monitoring that keep accounts safe.

#### [Cross Margin Requirement](/risk/cross-margin-requirement)

How margin requirements are calculated for cross-margin accounts, including the benefits of PnL offsetting across positions.

#### [Portfolio Margin](/risk/portfolio-margin)

How portfolio margin evaluates risk at the portfolio level for reduced margin requirements. Currently in beta.

#### [Mark Price Calculation](/risk/mark-price-calculation)

How Paradex calculates fair mark prices used for margin checks, PnL, and liquidation triggers.

## Market Safeguards

#### [Price Bands](/risk/price-bands)

Protective price boundaries that prevent orders from executing at extreme prices far from the market.

#### [Position Limits](/risk/position-limit)

Maximum position sizes enforced per instrument to manage concentration risk across the platform.

#### [Funding Mechanism](/risk/funding-mechanism)

Periodic funding payments that keep perpetual contract prices aligned with their underlying spot prices.

## Safety Nets

#### [Deleveraging](/risk/deleveraging)

Understand how automatic deleveraging works as a last resort when the insurance fund is insufficient.

#### [Socialized Losses](/risk/socialized-losses)

How losses are distributed in extreme scenarios when both liquidation and the insurance fund cannot cover deficits.

#### [Trade Busts](/risk/trade-busts)

Conditions under which trades may be reversed to maintain market integrity and protect participants.

> Understand how Paradex protects traders and maintains platform stability through its margin system, risk checks, and liquidation mechanisms.