What to do if the AscendEX contract liquidates?

When contract liquidation occurs on AscendEX, it's crucial to understand the situation, calculate losses, evaluate your strategy, and take steps to manage risk and recover financially.

Nov 25, 2024 at 06:44 am

Understanding AscendEX Contract Liquidation

AscendEX, a popular cryptocurrency exchange, offers a contract trading platform where users can trade futures and options contracts. While contract trading provides potential for high returns, it also carries significant risks, including the possibility of liquidation. Liquidation occurs when the value of your position drops below a certain threshold, and the exchange closes your position to cover potential losses.

In this article, we will explore what contract liquidation is, its potential consequences, and a detailed guide on what you can do if your AscendEX contract is liquidated.

What is Contract Liquidation?

Contract liquidation is a process by which an exchange closes a trader's open position due to a lack of sufficient funds to cover potential losses. In futures trading, each contract has a predetermined margin requirement, which represents the minimum amount of funds you need to maintain in your account to keep the position open.

If the value of your position moves significantly against you, causing your margin balance to fall below the required level, the exchange may initiate liquidation. This means that your position will be closed at the current market price, and you will lose any remaining funds in your margin balance.

Why Liquidation Can Be Devastating

Contract liquidation can have severe consequences for traders, especially those using leverage. Leverage amplifies both your potential gains and losses, and in the event of liquidation, you could lose more than your initial investment.

Steps to Take When Your AscendEX Contract is Liquidated

1. Understand the Situation

• Monitor your contract positions regularly to avoid liquidation.
• If you approach liquidation, add more margin to avoid triggering liquidation.
• If liquidated, analyze the market conditions and trading strategy to identify what went wrong.
• Document the liquidation event, including the contract type, leverage used, and trade details.

2. Calculate Your Losses

• Determine how much margin was lost during liquidation.
• If your margin balance is zero or negative, you may have lost additional funds.
• Contact AscendEX support to inquire about any potential losses or liabilities.

3. Evaluate Your Trading Strategy

• Analyze the market conditions and your trading decisions that led to the liquidation.
• Consider adjusting your risk management strategy, position sizing, and leverage usage.
• Seek professional advice or consult experienced traders if necessary.

4. Learn from the Experience

• Review the liquidation event to understand the triggers and vulnerabilities in your trading plan.
• Use the identified lessons to improve your risk management techniques.
• Remember that liquidation is a common occurrence in contract trading, and it should be treated as an opportunity for improvement.

5. Consider Risk Management Tools

• Utilize stop-loss orders to define a pre-determined exit point and limit potential losses.
• Set realistic targets and avoid chasing unrealistically high returns.
• Manage your overall risk exposure by diversifying your investments across different assets and markets.

6. Protect Your Capital and Recovery

• Refrain from reactive trading or attempting to recover losses immediately after liquidation.
• Take time to process the event and adjust your trading plans accordingly.
• Consider using hedging strategies or reducing your leverage to protect your remaining capital.

7. Seek Support

• Reach out to AscendEX customer support for assistance and clarification regarding the liquidation event.
• Engage with the exchange's community forum to connect with other traders and seek support.
• Explore third-party resources such as trading groups or educational materials to enhance your knowledge and risk management skills.