Risk can be defined as the probability of a negative event happening in your activities—one that goes contrary to your intended outcome.
Risk is part the cryptocurrency trade. It is the chance of an undesired outcome on the trade, which translates to making losses.
In this article, we'll walk you through effective strategies to manage risk on the Blockchain.com Exchange.
What is Stop Loss?
When opening a margin position, you can specify a stop loss trigger price in the trade ticket.
This means that when the market hits your specified trigger price, the Exchange will close your position via a Market Order. This will protect your position from being liquidated.
What is Margin Call ?
A margin call is a warning that will be triggered when
- Mark Price < Margin Call Price for long (buy) positions
- Mark Price > Margin Call Price for short (sell) positions
Here, our system will send you an email explaining that your position risks liquidation because the collateral does not represent a large enough percentage of the overall margin position.
It is, therefore, highly recommended to monitor markets closely during margin trading.
To meet a margin call and bring your position back to safety, you can
- Add more collateral to the position
- Partially or fully close the position
To avoid margin calls, use protective stop orders to limit losses .
What is liquidation?
When a position gets liquidated, you will lose all of the collateral for the position.
A liquidation is triggered when
- Mark Price < Liquidation Price for long (buy) positions
- Mark Price > Liquidation Price for short (sell) positions
During a liquidation you lose the collateral for the margin position, while the rest of your Exchange balance is unaffected.
The liquidation price of your position is displayed in the positions panel.
To avoid being liquidated, make sure you place a stop loss order or meet margin calls or place a limit order to close your positions.
Partially or Fully Closing Positions
From the position detail window, you may partially or fully reduce the size of your margin position.
You can close your position via limit orders but the limit price must be higher than the liquidation price:
You can also close your position via market orders:
When considering trading on margin, you should determine how the use of margin fits your own investment philosophy. It is important that you fully understand the risks, rules, and requirements involved in trading digital assets on margin. Margin trading increases your level of market risk. You may lose some or all of the collateral you post in connection with a margin trade. Blockchain.com may initiate the sale of digital assets in your account, without contacting you, to meet a margin call. You are not entitled to an extension of time on a margin call. Further details are set out in the Margin user agreement.