Can I still recover my losses after liquidation?

In leveraged trading, liquidation refers to the exchange’s forced closing of positions that cannot maintain margin requirements. Whether losses can be recovered after being liquidated depends on the market conditions at the time of liquidation, the trader's risk management strategy, and the exchange's policies. Understanding the liquidation mechanism, assessing market volatility, implementing risk management measures, understanding exchange policies, and considering recovery of losses are key steps in evaluating loss recovery opportunities after liquidation.

Is there still a chance to preserve losses after liquidation?

Liquidation refers to the exchange’s forced closing of a trader’s leveraged position when his margin account balance falls below the maintenance margin requirement. Whether losses are recoverable depends on a variety of factors, including market conditions at the time of the liquidation, the trader's risk management strategy, and the exchange's policies.

Step 1: Understand the triggering mechanism of liquidation

• Margin Ratio: This is the ratio of the trader’s account balance to the amount of margin used to open a position. When the margin ratio falls below a certain threshold, the exchange issues a margin call.
• Maintenance Margin: This is the minimum margin that traders must maintain to avoid liquidation. It is usually lower than the initial margin requirement.

Step 2: Assess market conditions

• Market Volatility: High volatility may lead to rapid price changes, thereby increasing liquidation risk.
• Market Trend: Liquidation may occur during a downward market trend, causing traders to suffer greater losses.

Step 3: Implement a risk management strategy

• Stop-loss order: A stop-loss order will automatically close the position when the price reaches a specific level, to limit losses.
• Take-profit order: When the profit reaches a specific target, the stop-profit order will automatically close the position to protect profits.
• Split position trading: Spreading funds into multiple positions can help reduce the risk of liquidation.

Step 4: Exchange policy

• Margin call: Some exchanges may require traders to top up margin after liquidation. This may increase traders' losses.
• Liquidation Protection: Some exchanges offer liquidation protection, allowing traders to recover losses under certain conditions. For example, Binance offers an options insurance fund to compensate traders who suffer liquidation losses under certain circumstances.

Step 5: Consider recovering losses

• Submit an appeal: Contact the exchange and provide evidence that the liquidation is unfair.
• Legal approaches: If the exchange does not cooperate, traders can consider taking legal action.
• Third-party mediation: Find help from a third-party mediation agency or industry association, such as the International Center for Consumer Protection Services (ICAPS).

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