Update on 2022-05-06
1. Proper Use of Margin
Margin trading increases risks while multiplying potential profits. The higher the degree of leverage, the higher the degree of risk and rate of return. Therefore, proper use of margin can help effectively reduce the risk of getting liquidated. Take the BTC/USDT margin trading as an example, users can trade the BTC/USDT pair with up to 25x leverage. However, they should adjust the leverage ratio according to the risk they can bear before borrowing.
Users need no application for borrowing before engaging in margin trading on AscendEX. The platform will automatically calculate the allowed borrowing amount for users based on the margin balance in their margin accounts and the maximum leverage of margin trading. Specifically, you can control the leverage ratio by adjusting the borrowing amount. For example, if you transfer 1 BTC to your margin account. Based on the maximum leverage of BTC (25x), you are allowed to trade 25 BTC at most. You can also choose to trade 5 BTC with 5x leverage.
Please note: The maximum leverage varies depending on which token you trade. You can check for details on the Interest Rate page.
2. Trading with a Small Position Size
Trading with a small position size means the size of a trade accounts for a small percentage of the account balance. A small trading size helps secure an adequate maintenance margin for margin traders, enabling them to control risks when encountering market volatility.
3. Setting a Stop-loss Function
As the market changes rapidly, it’s necessary to use the stop-loss function to reduce the risk of getting liquidate. Presetting a stop-loss order can effectively help traders limit and control possible losses, because they may not respond in a timely manner when a sudden market reversal occurs. The stop-loss function helps traders not only lock profits, but also control the losses within an expected range.
4. Reducing Trading Size or Closing Positions
The damping factor of a margin account = net assets/maintenance margin. The higher the damping factor of a margin account, the lower the risk to the account, and vice versa. When the damping factor reaches 1.2, users will receive a reminder email on forced liquidation; when the damping factor reaches 1, users’ position will be fully or partially closed. Users should keep a close lookout for the change of damping factor. Users should reduce their trading size or close their positions to lower the risk of being liquidated when the damping factor falls.
5. Keep Adequate Margins in Your Account
Paying close attention to the change of markets, damping factor and maintenance margin of the account, as well as keeping adequate margin collateral in the margin account can effectively reduce the risk of getting liquidated.
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