Is the margin gone out of Bitcoin contract liquidation? Or is it all gone?

Bitcoin contract trading: high returns and liquidation risk coexist Investors are becoming increasingly interested in cryptocurrencies, and Bitcoin contract trading, as a high-risk and high-return investment method, has attracted many attention. Contract trading allows investors to bet on future price rises and falls in Bitcoin, thereby achieving huge returns in the short term. However, the risk of liquidation also follows, which makes investors particularly concerned about the question of "what does a liquidation of Bitcoin contracts mean?" This article will conduct in-depth discussion on the liquidation mechanism and risk control strategies.

Filing of position: The critical point of margin exhaustion The liquidation of Bitcoin contracts is not simply a "margin is gone", but refers to the phenomenon that due to violent fluctuations in market prices, investors' losses exceed the range that their margin can bear, and the trading platform is forced to close positions.

In leveraged trading, investors need to pay a certain percentage of margin to open a position. Once the market price is opposite to the expected direction, margin will be used to make up for the losses. When the loss reaches a certain proportion (usually 80%-90%), the platform will trigger the position explosion mechanism to force the position to close the position to avoid further losses. The higher the leverage multiple, the more significant the risk amplification effect, and even a slight fluctuation in the market may lead to a liquidation. Bitcoin price fluctuates violently, especially in extreme market conditions, the risk of liquidation has increased significantly.

Platforms usually issue a warning of additional margin when the loss is close to the upper limit of margin ratio. If investors do not add in time, they may face forced closing of positions. Even if the loss still exceeds the margin after closing the position, a "cross-out position" may occur, that is, the account balance is negative. Some platforms will set up risk reserves or insurance funds to partially make up for the loss of position penetration.

The whole game is lost? Funding status after the liquidation After the Bitcoin contract is liquidated, investors' positions will be liquidated and they may face full capital losses. The exchange will try to close the position partially first, but if the margin gap cannot be filled, the full position will be liquidated, resulting in the account balance being zeroed. After the liquidation, the remaining funds (if any) will be returned to the account, but they are usually minimal.

After forced closing of positions, the lost funds are usually unable to be recovered. Unless there is an operational error or system abnormality on the exchange, the possibility of compensation is extremely low.

Risk control: a strategy to avoid liquidation In order to reduce the risk of liquidation, investors should take the following measures:

• Control leverage: Select the appropriate leverage multiple based on your own risk tolerance to avoid excessive leverage.
• Set stop loss orders: Set the stop loss point in advance to limit the maximum loss and avoid huge losses due to violent market fluctuations.
• Diverent investment: Do not invest all funds in a single transaction. Diversified investment can effectively reduce overall risks.

In short, Bitcoin contract trading contains huge profit potential, but it is also accompanied by extremely high risk of liquidation. Investors should fully understand their mechanisms, operate with caution, and adopt effective risk control strategies in order to obtain sustainable returns in contract trading.

The above is the detailed content of Is the margin gone out of Bitcoin contract liquidation? Or is it all gone?. For more information, please follow other related articles on the PHP Chinese website!