Liquidation of Long positions in Bitcoin futures on crypto exchanges
Daily liquidations of long positions (Long) in Bitcoin futures on crypto exchanges. Includes Binance, BitMEX, Bybit, FTX, Huobi, OKEx. In this chart, the start of the day is 4 pm GMT.
Liquidation of Long Positions in Bitcoin Futures: Reasons, Consequences and Strategies
Cryptocurrency market, especially trading Bitcoin futures, characterized by high volatility and risks. Liquidating long positions (Long) is one of the key aspects to consider when trading futures.
What is liquidation of a long position?
Ликвидация длинной позиции происходит, когда трейдер открывает позицию «Long» (на повышение цены Биткоина) с использованием заемных средств (маржи) и цена Bitcoin падает ниже уровня, установленного биржей. В этом случае биржа автоматически закрывает позицию трейдера, чтобы минимизировать риски для себя.
Reasons for liquidating long positions:
- Bitcoin price drop: This is the most obvious reason. If Bitcoin price falls, traders holding long positions may find themselves at a loss and the exchange may close their position.
- High leverage (margin): Highly leveraged traders are more sensitive to price fluctuations.
- Low Margin Level: If a trader has too little funds in his account to cover losses, exchange may close his position to prevent further losses.
- Unfavorable news: News Events, negatively affecting the Bitcoin market, can provoke a fall in prices and massive liquidations of long positions.
Consequences of liquidating long positions:
- Losses for Traders: Traders whose positions are liquidated lose all of their investment.
- Reduced Liquidity: Mass liquidations can cause prices to plummet, reducing liquidity in the market.
- Risk of cascading liquidations: Liquidation of one position can trigger a chain reaction and lead to further liquidations.
Risk management strategies for futures trading:
- Choosing the Right Position Size: Do not open positions that are too large for your trading capital.
- Using stop losses: Set a stop loss order that will automatically close your position if the price reaches a certain level.
- Leverage Management: Don't use too much leverage.
- Market Research: Follow news, technical analysis and market sentiment.
- Portfolio diversification: Don't invest all your funds in one asset.
In conclusion:
Liquidations of long positions (Long) in Bitcoin futures can be devastating for traders. Studying the factors that influence liquidation and applying the right risk management strategies is the key to success in this field.
