What to do if a margin liquidation occurs on BitMart

Margin liquidation on BitMart, an automatic closing of borrowed-funds positions, is triggered when the asset price falls below a specific threshold to prevent excessive losses and protect the platform from loan defaults.

Nov 23, 2024 at 07:22 pm

Understanding Margin Liquidation on BitMart

Definition:

Margin liquidation occurs when the market price of a cryptocurrency asset purchased with borrowed funds (margin trading) falls below a specific threshold, resulting in the automatic closing of the trader's position to cover the loan. This mechanism is designed to prevent excessive losses and protect the platform by mitigating the risk of loan defaults.

Causes of Margin Liquidation on BitMart

• Falling Asset Price: The primary reason for margin liquidation is a sudden or sustained drop in the value of the asset being traded on margin. This drop can trigger the liquidation threshold, leading to position closure.
• Insufficient Margin: When the trader's margin balance (the value of the assets held as collateral) falls below the required level, the platform initiates liquidation to protect its loaned funds.
• Market Volatility: Extreme market volatility can lead to rapid price fluctuations that can quickly force the trader's margin balance below the liquidation threshold.
• Technical Issues: Technical glitches or platform maintenance can temporarily affect the margin balance calculation, potentially leading to premature liquidation.

Impact of Margin Liquidation on BitMart

• Forced Position Closure: Margin liquidation forcibly closes the trader's position, resulting in a sale of the asset and a loss of any remaining equity.
• Loss of Profit: The liquidation process may occur before the trader can secure profits, leading to a complete loss of any potential gains.
• Debt Repayment: Liquidation proceeds cover the outstanding loan balance owed to the platform first, leaving the trader responsible for any remaining shortfall.
• Reputation Damage: Margin liquidation can harm the trader's reputation by signaling to other market participants that they are not managing their positions effectively.

Steps to Take if a Margin Liquidation Occurs on BitMart

1. Monitor Market Conditions

• Stay informed about the market behavior of the asset you are trading on margin.
• Track the asset's price, volatility, and news that may impact its value.
• Set realistic and appropriate leverage levels based on your trading strategy and risk tolerance.

2. Maintain Sufficient Margin

• Ensure that you have a sufficient margin balance to adequately cover your positions.
• Regularly top up your margin account or adjust your position size to maintain an acceptable margin level.
• Monitor the platform's margin requirements and adjust your positions accordingly.

3. Manage Risk Effectively

• Diversify your portfolio by trading multiple assets to reduce the impact of price fluctuations in a single asset.
• Set stop-loss orders to automatically close positions when the market price reaches specific thresholds.
• Avoid excessive leverage that can amplify losses.
• Limit the number of active margin positions to manage your overall risk exposure.

4. Understand Liquidation Thresholds

• Familiarize yourself with BitMart's liquidation thresholds for each asset you trade on margin.
• Monitor your margin balance in relation to these thresholds to avoid unexpected liquidations.
• Consider the potential impact of price volatility on your liquidation risk.

5. Respond Promptly to Liquidation

• If margin liquidation occurs, respond promptly to minimize further losses.
• Close other positions manually if possible to prevent additional liquidations.
• Check the reason for liquidation and adjust your trading strategy or risk management approach accordingly.
• Review the impact of the liquidation on your overall portfolio and adjust your financial plan as necessary.

6. Contact BitMart Support

• In case of any discrepancies or technical issues related to margin liquidation, contact BitMart customer support for assistance.
• Provide detailed information about the situation and request a review if warranted.
• Follow BitMart's guidance and instructions to resolve the issue or address any concerns.

7. Learn from the Experience

• Analyze the reasons behind the margin liquidation and identify areas for improvement in your trading strategy.
• Adjust your risk management protocols to prevent or minimize future liquidations.
• Seek professional advice or engage in further education to enhance your understanding of margin trading.