Liquidation Price
What is the liquidation price and how does it work on
Bybit? A liquidation price is the price at which a trader’s open position will be automatically closed by the broker when the market price moves against the trader’s position. This is also known as a margin call. On Bybit, the liquidation price is the lowest price at which a trader’s position can be closed at, and if the market price reaches this level, all of the trader’s funds will be automatically liquidated.
How Does Liquidation Work On Bybit?
When a trader opens a position on Bybit, they must deposit a certain amount of funds as collateral. This is known as the margin. The margin is then used to cover the losses if the market moves against the trader’s position. If the market price falls to the liquidation price, then Bybit will automatically close the position and take the trader’s funds to cover their losses.
Bybit also offers a feature known as “Auto-Deleveraging” (ADL). This feature ensures that when a trader’s position is liquidated, the losses are shared among all of the traders who have open positions on the same side of the market. This prevents one trader from taking all of the losses, and it helps to protect the other traders from incurring excessive losses.
Risk Management
It is important for traders to understand the risks associated with trading on Bybit and to have a risk management plan in place. Traders should always ensure that they have enough funds in their account to cover their margin requirements and that they are aware of the liquidation price. By setting appropriate stop-loss orders and managing their risk effectively, traders can minimize the chances of their position being liquidated.
Conclusion
The liquidation price is an important concept for traders to understand when trading on Bybit. Knowing the liquidation price and having a risk management plan in place can help to protect traders from incurring excessive losses. Bybit also offers features such as Auto-Deleveraging that can help to protect traders from incurring large losses due to liquidations.
Video Link
Here is an informative video about liquidation on Bybit: