Updated: Jul 15, 2020
We have to avoid it (being REKT) on BitMEX exchange as hell. Common mistake is setting Stop Loss Order so close to the Liquidation Price. We explain how to save a lot of BTC.
Should I set my Stop Loss? By Last or Mark Price?
Traders who ignore Stop Loss Orders or do it wrong way. It easily leads to being REKT.
Let's start explaining! There are several ways to set Stop Loss Order on BitMEX but Ministry Of Margin Trading will focus and show you the best ones in our opinion.
What is Liquidation Price?
First of all, on BitMEX, the worst that can happen to you is liquidation (being REKT). We will repeat it later again! Why? In this case you lose full deposit designed for this trade or even the entire amount you deposited into your BitMEX account if you traded with margin cross. Nobody likes it, as you lose more than you should. Why more than should I?
Here is an example explaining why you should always avoid being liquidated:
Let's say you got crazy and you opened trade on BitMEX exchange with the highest possible 1:100 leverage. This "crazy" word we used, not meaning huge risk here. This is about no symmetry of risk vs profits.
If you open buy position with 100x leverage at price $6000 hoping for Bitcoin increases, your position would be liquidated more or less at $5970 which means that when the price's drop exceed 0.5% ($30 in this case) you will lose 100% of you BTC designed for this trade. How much do you earn when the price will go the same $30 but up?
In other words: how much is your profit when the price will increase by about 0.5%? The answer is so sad: only 50%. Is this a fair ratio in your opinion?
You lose 100% of deposit but you can earn only 50%. That is why at Bitmex exchange you should not trade without stop loss especially with huge leverage!
How to avoid it being REKT on BitMEX? Now have a look how most traders set up their Stop Loss.
Two most common mistakes:
1st Stop loss so close to Liq. Price
In most of the cases investors set up their Stop Orders very close before the Liquidation Price. I mean like 1-2USD. Does it look smart, right? Yep, true, it looks! But what if the price change rapidly about $20 without any price it the middle? If jump it over. REKT! Pain! Complaining! Do you remember this moment what you got e-mail from the exchange with information about it? I hate it.
Stop complaining, the solution is coming. It is never 100% certain so but SL $25-30 before liquidation price looks much safer.
And now with this silly case study mentioned above (with x100 leverage at price $6000): think how did you want to earn money if you stop is just about $10 below your entry price level? It is just 2 seconds and it is gone.
This is why Ministry Team prefers to trade on BitMEX using max X25 leverage. Okey, there are exceptions but try to forget about it!
2nd Setting Stops by Mark Price not by Last Price
This mistake is even more important!
Set stop by mark price not by the last price! This is the secret.
Mark Price is more fair and is changing much much slower. It gives you have bigger chances to close your trade at planned stop and it allows you to save some BTC rather than get Liquidated and lose it all.
It is easier to control your trade by mark price that is why BitMEX came up with this idea. Use this every time!
It is time a for bloodcurdling BitMEX bonus. Last week during the huge and rapid price movements Ministry noticed on BitMEX live platform that many trades got liquidated with $10mln value quantity orders. Did they lose how much? Have a guess. The answer is easy...They lost more than they should... almost 9 BTC each!
I mean at least 9 Bitcoins because of the a wrong bet and next almost 9BTC because they got Liquidated. They should lose 9 XBT but they lost extra 9 BTC each! It is just $60 000. Only because they haven't read this article or they really sleep on cash. Margin trading is not easy, it is not for middlemen. Use our BitMEX calculator to know how much exactly you earn, what a fee or rabate applay for this quantity of XBT contracts, where is your liquidation price etc.
Related to BitMEX topics:
1. Bitmex Calculator in Excel