The surge of BTC during the past week was definitely a substantial boost to holders in anticipation of another bull.
On April 29, it broke through the $8,000 mark and even soared to $9,371 the next day. But for the shorts player, what waited for them was a bloodbath: according to data, just on Bitmex alone, over $116 million in shorts position got liquidated on April 29.
Please Note: This is a Press Release
With the Bitcoin market becomes more mature, many people explore different derivatives to enhance their profits. Leverage trading is what these traders turn to: with leverage, they can open greater positions with smaller capital invested. However, leverage is a double-edged sword. While it can generate spectacular profits, it can also lead to huge losses. When dealing with Bitcoin – an assent famous for its volatility – small changes in Bitcoin’s price may trigger liquidations thus resulting in the loss of money.
Forced liquidation, to put it simply, is when the broker forcibly closes an investors’ positions as a result of said positions falling below the margin requirement. When doing leverage trading, we all have to invest some money to open a position, that money is called “margin.” The used margin is not available for opening new positions.
If your positions continue to generate losses, your liquidation margin will decrease. When it reaches a certain level, your broker will give you a margin call asking you to deposit more collateral funds. When you fail to meet the requirements in time, your positions will be liquidated in the order First In, First Out (FIFO), and having your position liquidated certainly hurt a lot.
To illustrate, at Bexplus where the margin rate for forced liquidation is 30%, Jack uses 1 BTC to open a long position so now his used margin is 1 BTC. If the market sees a sudden drop and results in an unrealized loss of 0.7 BTC, his margin level would be (0.3 ÷ 1) × 100% = 30%. At this point, Bexplus will liquidate Jack’s positions to prevent further losses.
The margin rate various from platform to platform. While Bitmex’s maintenance margin for position size lower than 200 BTC is 0.45%, some have a higher tolerance. There is no clear definition of how large a margin rate is an ideal one, you should assess your risk tolerance and find the one that suits you most.
The third halving event is approaching, and we could expect there will be a rocky path ahead. If you feel like leverage trading is your thing, here I would like to give you some advice on how to better protect yourself from liquidation.
Thorough Preparation Makes its Own Luck
For beginners, there are tons of articles, videos, and PDFs online talking about leverage trading. However, the market of Bitcoin is changing very fast and it could be easy to get lost in all the numbers and indicators at the beginning. Besides, for novice traders with little experience in leverage trading, any slight changes could be terrifying and confusing.
Therefore, even if you have read a lot of tutorials online explaining the principles of leverage trading and you feel confident enough, you could still use some actual practice by using a demo account. A good demo account serves as a sandbox for you to improve your skills without worrying about losses.
Know Your Limit, Keep a Tight Stop-loss
Since Bitcoin trades around the clock and it is impossible for us to monitor the market all the time, be sure to make good use of the stop-loss option that can help you lower the risks. Once the market price reaches the pre-set triggered price, your positions will be automatically closed and trade with the optimal market price available at that time.
Stay Updated with Your Mobile Devices
In the past, traders who wanted to buy or sell stocks or commodities had to do business at the stock exchanges in person. As we advance into the digital age, we are now able to trade on our computers and smart-phones. Nowadays, many mobile trading apps are as full-featured as their desktop counterparts, while being far more convenient. You can check the market and trade while taking the train or waiting for your food to come.
In this regard, I recommend Bexplus, whose mobile app not only covers the necessary functions (real-time charts, a variety of indicators, news alerts and etc.) but is also installed with the real-time notification to ensure users can monitor the market fluctuation 24/7. This could keep you updated while taking your mind off the stress temporarily. In such a volatile market, this could very well be the life-saver of your funds. Besides, all data and assets can be accessed through all kinds of devices including Windows, Macbook, Android phones, iPhones, and tablets. Bexplus app is available on Apple App Store and Google Play.
Advantages of Bexplus
- No KYC requirement, registration with E-mail verification within a few minutes
- Replenishable demo account with 10 BTC for traders to get familiar with leverage trading
- 100% bonus for every deposit
- Forced liquidation triggered when account margin is equal to or lower than 30%
- Affiliate program with up to 50% commission reward
- 24/7 customer support