CoinEx | The First Forced Liquidation of Futures Contract Beginners
In the crypto market, you can go long/short through futures contract trading to profit from rising/falling prices under market swings. Moreover, it is also possible to receive high returns with a small principal. As such, futures contract trading has become one of the most popular choices among crypto investors. For beginners, trading crypto futures contracts comes with both rewards and risks. Most futures contract traders have experienced forced liquidation, which is not simply another term for loss. As a beginner, you should make the most out of your first forced liquidation, which could be a precious lesson.
Investors are always attracted by the high leverage when they just start trading futures contracts. If you are new to futures contract trading, we recommend trading with a small margin, which will help you learn the ropes. Here, let’s go through my first forced liquidation. At the time, I just started trading crypto futures contracts and bought a BTC linear futures contract with 10 USDT at a 100x leverage ratio on CoinEx. As my margin was insufficient and the leverage ratio was too high, I soon received a Forced Liquidation Warning Notice from CoinEx that fully illustrated the risks in futures contract trading.
CoinEx estimates the liquidation risk of all futures contract orders. The risk rate clearly indicates the probability of forced liquidation concerning your futures contract position. When the liquidation risk exceeds 70% and 90%, you will receive an email titled Forced Liquidation Warning Notice, which will remind you that your position might get liquidated. This allows traders to stop loss or add margin in advance. After forced liquidation, you will receive an email titled Contract Liquidation Notice, indicating that your position has been liquidated.
On the futures contract page of the CoinEx APP, after opening a position, you can see a percentage icon in the upper left corner that indicates the current risk of forced liquidation. As the risk goes up, the color will turn red, which helps you monitor the risk level in real time. On the CoinEx website, the risk of liquidation (Bankruptcy Risk) is shown in the Position Details. As futures contract newbies often have no idea how the liquidation risk is calculated, these reminders are very beginner-friendly. CoinEx offers real-time monitoring of the risk level and clearly specifies the latest risk rate of your position to help you mitigate the risks.
Therefore, if you are a beginner, please keep track of the risk reminders and indicators from CoinEx to stop your loss as appropriate. Personally, I have learned the importance of the Liquidation Risk indicator through my first forced liquidation. Additionally, as a beginner, you should learn when to take profit/stop loss. In this respect, CoinEx offers a tool called TP/SL (Take-Profit/Stop-Loss), which automatically calculates the PNL status corresponding to the price you entered. By setting the Stop Price in advance, your positions will be closed automatically before forced liquidation, which reduces your loss.
Having experienced my first forced liquidation, I’d like to offer the following suggestions to futures contract beginners:
- Be careful with leverage: a low leverage ratio is recommended;
- Keep track of the Liquidation Risk specified on the platform, and take profit/stop loss at any moment;
- Check the Forced Liquidation Warning Notice from the platform to stop your loss in time;
- Stop your loss in advance through TP/SL.
The above content is for reference only & does not constitute any investment advice.
