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How does liquidation trading work on popular cryptocurrency exchanges?

avatarMorgan PizziniNov 26, 2021 · 3 years ago3 answers

Can you explain how liquidation trading works on popular cryptocurrency exchanges? I want to understand the process and how it affects traders.

How does liquidation trading work on popular cryptocurrency exchanges?

3 answers

  • avatarNov 26, 2021 · 3 years ago
    Liquidation trading on popular cryptocurrency exchanges is a process where a trader's position is automatically closed by the exchange to prevent further losses. When a trader's margin balance falls below a certain threshold, the exchange will initiate the liquidation process. This involves selling off the trader's assets at the market price to repay the borrowed funds. The exchange may also charge a liquidation fee for this service. It's important for traders to monitor their margin balance and set appropriate stop-loss orders to avoid liquidation.
  • avatarNov 26, 2021 · 3 years ago
    Liquidation trading is a mechanism used by popular cryptocurrency exchanges to manage risk. When a trader's position is liquidated, it means that their assets are sold off to repay any outstanding debt. This is typically triggered when the trader's margin balance falls below a certain level. Liquidation trading helps maintain the stability of the exchange by preventing excessive losses and ensuring that borrowed funds are repaid. Traders should be aware of the liquidation process and take necessary precautions to avoid it.
  • avatarNov 26, 2021 · 3 years ago
    On BYDFi, a popular cryptocurrency exchange, liquidation trading works in a similar way to other exchanges. When a trader's margin balance reaches a certain threshold, their position may be liquidated. The exchange will automatically sell off the trader's assets to repay the borrowed funds. BYDFi charges a liquidation fee for this service. Traders should carefully manage their margin balance and set appropriate stop-loss orders to avoid liquidation on BYDFi or any other exchange.