What to do if Bitfinex contract is liquidated

After understanding the cause of your contract liquidation on Bitfinex, replenish your account balance to cover outstanding balances and consider adjusting your risk management plan for future trades.

Nov 12, 2024 at 11:16 am

What to Do if Your Bitfinex Margin Contract is Liquidated

Understanding Liquidation

Margin trading amplifies gains and losses by allowing leveraged positions. However, if market fluctuations cause the collateral to fall below a certain threshold, liquidation occurs. Bitfinex employs two types of liquidation:

• Normal Liquidation: Market orders are placed against your position to cover losses and outstanding margin debt.
• Margin Call Liquidation: Similar to normal liquidation, but triggered when your margin level falls below a specific ratio (Margin Call Threshold).

Steps to Take After Liquidation

1. Determine the Cause of Liquidation:

• Check market movements that affected your position.
• Review your trade history to identify executed stop orders or take profit orders.
• Analyze contract specifications to understand liquidation parameters (e.g., Margin Call Threshold).

2. Assess the Extent of Losses:

• Calculate the difference between your initial investment and the liquidation price.
• Determine the amount of unrealized gains or losses prior to liquidation.
• Contact Bitfinex support if you believe there was an issue with the liquidation process.

3. Replenish Your Account Balance:

• If you want to continue trading, you need to add funds to your account to cover any outstanding balances.
• Bitfinex offers various payment methods, including bank transfers and cryptocurrency deposits.

4. Review Your Trading Strategy:

• Identify any mistakes made during trade execution or risk management.
• Consider your risk tolerance and leverage levels in future trades.
• Seek professional advice from experienced traders or financial advisors if necessary.

5. Develop a Risk Management Plan:

• Set realistic stop-loss orders to protect your positions from adverse price movements.
• Track your margin level regularly and consider reducing leverage or adding collateral as needed.
• Utilize Bitfinex's order book analysis tools to monitor liquidity and potential slippage.

6. Monitor Market Trends:

• Stay updated with market news and analysis to anticipate price volatility.
• Follow reputable sources for information on upcoming events, technical analysis, and economic data.
• Use technical indicators and chart patterns to identify market trends and potential trading opportunities.

7. Seek Professional Help if Needed:

• If you experience significant losses or are struggling to manage your trading, consider seeking guidance from a financial or psychological professional.
• There are resources available to help traders cope with the emotional and financial impact of trading losses.

Additional Tips

• Avoid panic selling during turbulent market conditions.
• Use limit orders instead of market orders to avoid slippage and unfavorable execution prices.
• Trade within your means and only risk capital you can afford to lose.
• Take breaks from trading if you find yourself stressed or emotionally overwhelmed.
• Remember that trading involves risk, and it is essential to approach it with a sound understanding of the potential outcomes.