Understanding Liquidation Risk on Our Platform
At our platform, we strive to provide a safe and secure environment for all our users to trade and invest in various financial instruments. However, it is important for our users to understand the concept of liquidation risk and how it may affect their trading activities.
What is Liquidation Risk?
Liquidation risk refers to the possibility of losing all or a significant portion of your investment due to the sudden and unexpected decline in the value of your assets. This can happen when the market moves against your position, causing your account to fall below the required margin level.
Who is at Risk of Liquidation?
On our platform, only users with active derivatives or swaps strategies are at risk of liquidation. This means that if you are using these types of trading strategies, you need to be aware of the potential for liquidation.
However, it is important to note that the risk of liquidation is minimal and cannot be entirely eliminated. We have implemented risk management measures to help mitigate this risk, but it is ultimately the responsibility of the user to monitor their positions and manage their risk accordingly.
How to Minimize Liquidation Risk
There are a few steps you can take to minimize the risk of liquidation on our platform:
Spot Strategies vs. Derivatives Strategies
It is important to note that users employing spot strategies are not subject to the risk of liquidation. This is because spot trading involves buying and selling assets at the current market price, without the use of leverage or margin.
On the other hand, derivatives and swaps strategies involve trading contracts that derive their value from an underlying asset. These types of trading strategies often involve the use of leverage, which can increase the potential for gains but also increases the risk of losses and liquidation.
Conclusion
In summary, liquidation risk is a possibility for users employing derivatives or swaps strategies on our platform. While we have measures in place to help mitigate this risk, it is important for users to understand and manage their risk accordingly. We recommend regularly monitoring your positions and maintaining a sufficient margin level to minimize the risk of liquidation.
Do you need more information?
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