Date: 2024-04-30 05:42:08
1. Margin Level:
To prevent liquidation, monitoring your Futures Margin Ratio closely is crucial. Liquidation occurs when your margin ratio(Maintenance Margin / Margin Balance) hits 100%, leading to the closure of your positions. In the event of a price move against your strategy, make sure your futures account maintains an adequate margin balance. Having a higher margin balance results in a lower liquidation price(when you are doing long), providing better protection against liquidation.
2. Use stop-loss order to limit your loss:
A Stop-loss order is a conditional order that triggers once a specified trigger price is reached, leading to execution at market or limit price depending on your order parameters. Its purpose is to restrict potential losses for an investor in case of an unfavorable move. For example, if you set a 10% stop-loss from your entry price, and your entry order was filled at $70,000, the stop-loss order will be triggered when the price falls by 10% from $70,000. Utilizing a stop-loss enables you to exit a losing position sooner, thus avoiding getting liquidated and losing all.
3. In cross-margin mode, don’t add more quantity to a losing position.
Consider this situation: Suppose you have a wallet balance totaling 1000 USDT. You've initiated a long ETHUSDT position worth 3000 USDT with 20x leverage at $3,000. In this example, your liquidation price will be $2,015 (This calculation did not include fee)
Now let's imagine ETHUSDT's price drops by 10% to $2,700. You decided to add another long ETHUSDT position worth 2,700 USDT with 20x leverage at $2,700. With this latest addition, the liquidation price has now changed to $2,364.25.
As shown, adding more quantities to a losing position will increase your liquidation price(when you are doing long) of the entire position under cross-margin mode.
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