BitMEX is a popular cryptocurrency exchange that allows traders to leverage their positions up to 100x. While this can lead to significant profits, it also increases the risk of liquidation. Liquidation occurs when a trader’s position is forcibly closed due to insufficient margin. Understanding how liquidation works on BitMEX is crucial for traders to manage their risk effectively.
In this BitMEX liquidation guide, traders will learn the basics of trading on BitMEX, contract specifications, funding, and how liquidation is calculated. The guide will also cover frequently asked questions related to liquidation on BitMEX. By the end of this guide, traders will have a comprehensive understanding of liquidation on BitMEX and how to avoid it.
Key Takeaways
- Traders on BitMEX can leverage their positions up to 100x, which increases the risk of liquidation.
- Understanding the basics of trading on BitMEX, contract specifications, and funding is crucial for managing the risk of liquidation.
- Traders can avoid liquidation on BitMEX by monitoring their margin closely and setting stop-loss orders.
Understanding BitMEX
BitMEX is a Bitcoin-based trading platform that allows users to trade cryptocurrency derivatives with leverage. It was founded in 2014 and is wholly owned and operated by HDR Global Trading Limited, a Republic of Seychelles incorporated entity. BitMEX is known for its innovative products and features, such as perpetual swaps and the ability to trade with up to 100x leverage.
BitMEX is headquartered in the Global Gateway 8, Rue de la Perle, Providence Mahé, Seychelles. It operates under the International Business Companies Act of 1994 and is subject to the laws of the Republic of Seychelles. BitMEX has restricted jurisdictions where it does not operate, including the United States of America, Québec (Canada), Hong Kong Special Administrative Region of the People’s Republic of China, Bermuda, Cuba, Crimea and Sevastopol, Iran, Syria, North Korea, and Sudan.
BitMEX offers a range of trading products, including perpetual swaps, futures contracts, and options contracts. Perpetual swaps are a type of derivative that allows traders to speculate on the future price of an asset without a set expiration date. Futures contracts are similar to perpetual swaps but have a set expiration date. Options contracts give traders the right, but not the obligation, to buy or sell an asset at a predetermined price.
BitMEX charges fees for trading and funding. Trading fees are charged on a per-trade basis and vary depending on the product and the amount of leverage used. Funding fees are charged every eight hours and are based on the interest rate difference between the two currencies in the trading pair.
In summary, BitMEX is a popular cryptocurrency derivatives trading platform that offers a range of products and features. It operates under the laws of the Republic of Seychelles and has restricted jurisdictions where it does not operate. BitMEX charges fees for trading and funding, and its fees vary depending on the product and the amount of leverage used.
| Entity | Description |
|---|---|
| BitMEX | Bitcoin-based trading platform that allows users to trade cryptocurrency derivatives with leverage |
| Republic of Seychelles | The country where BitMEX is incorporated and subject to its laws |
| HDR Global Trading Limited | Wholly owned and operated by this entity |
| International Business Companies Act of 1994 | The act under which BitMEX operates |
| Global Gateway 8, Rue de la Perle, Providence Mahé | BitMEX’s headquarters |
| Restricted Jurisdictions | Countries where BitMEX does not operate |
| United States of America | One of the restricted jurisdictions |
| Québec (Canada) | One of the restricted jurisdictions |
| Hong Kong Special Administrative Region of the People’s Republic of China | One of the restricted jurisdictions |
| Bermuda | One of the restricted jurisdictions |
| Cuba | One of the restricted jurisdictions |
| Crimea and Sevastopol | One of the restricted jurisdictions |
| Iran | One of the restricted jurisdictions |
| Syria | One of the restricted jurisdictions |
| North Korea | One of the restricted jurisdictions |
Basics of Trading on BitMEX
BitMEX is a popular cryptocurrency trading platform that offers a variety of trading options for Bitcoin and other cryptocurrencies. BitMEX uses a unique trading system that allows traders to trade contracts, rather than the actual cryptocurrency itself. These contracts are designed to track the price of the underlying asset, and traders can profit by correctly predicting the direction of the price movement.
To start trading on BitMEX, traders need to create an account and deposit Bitcoin (XBT) into their account. Once the account is funded, traders can choose from a variety of trading options, including futures, perpetual contracts, and options.
When trading on BitMEX, traders will encounter a variety of symbols and terms that are unique to the platform. The most important symbols are the contract symbol and the XBT symbol. The contract symbol represents the specific contract that the trader is trading, while the XBT symbol represents the underlying asset (Bitcoin).
Traders can choose to go long or short on a contract, depending on their prediction of the price direction. Going long means that the trader is betting that the price will increase, while going short means that the trader is betting that the price will decrease.
One of the key features of BitMEX is the ability to trade with leverage. Leverage allows traders to increase their exposure to the market without having to put up the full amount of capital. For example, if a trader wants to trade with 10x leverage, they only need to put up 10% of the total trade value.
Traders should be aware that trading with leverage can increase both profits and losses, so it is important to use leverage responsibly. BitMEX offers a variety of leverage options, ranging from 1x to 100x.
Overall, BitMEX offers a unique and powerful trading platform for cryptocurrency traders. With a variety of trading options, leverage options, and a user-friendly interface, BitMEX is a great choice for both novice and experienced traders.
| Entity | Definition |
|---|---|
| Trading | The act of buying and selling assets on a trading platform |
| Bitcoin (XBT) | A cryptocurrency that is traded on BitMEX |
| Contract | A financial instrument that tracks the price of an underlying asset |
| Symbol | A unique identifier for a specific contract |
| Side | The direction of the trade (long or short) |
| Direction | The predicted direction of the price movement |
| Position | The trader’s current exposure to the market |
| Leverage | The ability to increase exposure to the market without putting up the full amount of capital |
Understanding Liquidation on BitMEX
BitMEX is a popular cryptocurrency trading platform that offers traders the ability to leverage their positions. However, with leverage comes risk, and traders must be aware of the potential for liquidation. Liquidation occurs when a trader’s position is forcibly closed by the exchange due to insufficient margin. This section will explain the basics of liquidation on BitMEX.
Liquidation Price
The liquidation price is the price at which a trader’s position will be forcibly closed. It is calculated based on the trader’s leverage, position size, and the maintenance margin requirement. The maintenance margin requirement is the minimum amount of margin required to keep a position open. If the margin falls below this level, the position will be liquidated.
Time of Liquidation
The time of liquidation is not fixed and can occur at any time when the maintenance margin requirement is not met. The liquidation process is automatic and occurs when the price reaches the liquidation price. It is important to note that the liquidation price is an estimate and may differ from the actual liquidation price due to market volatility.
Margin
Margin is the amount of collateral required to open a leveraged position. BitMEX offers up to 100x leverage, which means that traders can open a position with only 1% of the total position value as collateral. However, with high leverage comes high risk, and traders must be aware of the potential for liquidation.
Maintenance Margin Requirement
The maintenance margin requirement is the minimum amount of margin required to keep a position open. It is calculated based on the trader’s leverage and position size. The higher the leverage, the higher the maintenance margin requirement. If the margin falls below this level, the position will be liquidated.
Table
| Entity | Definition |
|---|---|
| Liquidation | The process of forcibly closing a trader’s position due to insufficient margin |
| Liquidation Price | The price at which a trader’s position will be forcibly closed |
| Time of Liquidation | The time at which a trader’s position is forcibly closed |
| Margin | The amount of collateral required to open a leveraged position |
| Maintenance Margin Requirement | The minimum amount of margin required to keep a position open |
In summary, traders must be aware of the potential for liquidation when trading on BitMEX. The liquidation price is the price at which a trader’s position will be forcibly closed, and the time of liquidation is not fixed. Traders must also be aware of the maintenance margin requirement, which is the minimum amount of margin required to keep a position open. High leverage comes with high risk, and traders must be cautious when using leverage on BitMEX.
BitMEX Contract Specifications
BitMEX offers a variety of contracts for trading, including perpetual contracts and futures contracts. Each contract has its own set of specifications, including tick size, contract size, and funding rate.
The tick size is the minimum price movement for the contract, and it varies depending on the contract. For example, the XBTUSD perpetual contract has a tick size of 0.5 USD, while the ETHUSD perpetual contract has a tick size of 0.05 USD.
The contract size is the amount of the underlying asset that each contract represents. For example, the XBTUSD perpetual contract has a contract size of 1 USD of Bitcoin, while the ETHUSD perpetual contract has a contract size of 1 USD of Ethereum.
The funding rate is the rate at which longs pay shorts or vice versa to maintain the price of the perpetual contract close to the underlying index price. It is calculated every eight hours and varies depending on the market conditions.
BitMEX also uses the Mark Price and Index Price to calculate the Liquidation Price and Settlement Price for each contract.
The Mark Price is used to calculate Unrealized PNL and Liquidation Price. It is calculated as the weighted average of the last price of the contract and the Index Price. The Index Price is the price of the underlying asset on the BitMEX Index, which is calculated based on the prices of several spot exchanges.
The Settlement Price is the price at which a Futures Contract settles. It is calculated based on the average of the Index Price over a period of time prior to settlement to avoid price manipulation.
Here is a table that summarizes the contract specifications for two of BitMEX’s most popular perpetual contracts:
| Contract | Tick Size | Contract Size | Funding Rate |
|---|---|---|---|
| XBTUSD | 0.5 USD | 1 USD of Bitcoin | Varies |
| ETHUSD | 0.05 USD | 1 USD of Ethereum | Varies |
Overall, understanding the contract specifications is essential for successful trading on BitMEX. Traders should carefully review the specifications of each contract before trading to ensure they understand the risks and opportunities involved.
Understanding BitMEX Funding
BitMEX funding is a mechanism that ensures the BitMEX perpetual swap contract trades at a price that is close to the underlying asset price. The funding rate is the cost of holding a position in the perpetual swap market. It is calculated every eight hours and is exchanged between buyers and sellers of the contract.
The funding rate is determined by the difference between the perpetual swap contract price and the underlying asset price. If the perpetual swap contract price is higher than the underlying asset price, the funding rate will be positive, and long positions will pay short positions. If the perpetual swap contract price is lower than the underlying asset price, the funding rate will be negative, and short positions will pay long positions.
The funding basis is the difference between the funding rate and the interest rate. It represents the cost of holding a position in the perpetual swap contract market. The funding basis is calculated by adding the interest rate to the funding rate. If the funding basis is positive, long positions will pay short positions. If the funding basis is negative, short positions will pay long positions.
Traders can view the current funding rate and funding basis on the BitMEX trading platform. The funding rate and funding basis are also available on various third-party websites.
It is essential to keep in mind that the funding rate and funding basis are subject to change every eight hours. Traders should monitor these rates closely to ensure they are aware of any changes that may affect their positions.
| Entity | Definition |
|---|---|
| Funding Rate | The cost of holding a position in the perpetual swap market. |
| Funding Basis | The difference between the funding rate and the interest rate. |
BitMEX API Explorer
The BitMEX API Explorer is a tool that allows users to interact with the BitMEX API. It provides a user-friendly interface that allows users to test API requests and view responses. The API Explorer is accessible through the BitMEX website and requires users to have a BitMEX account.
The API Explorer provides a variety of functions, including executing raw order and balance data, viewing swap funding history, and receiving account notifications. It also allows users to query liquidation data using the liquidation REST API endpoint.
To use the API Explorer, users must enter their API key and secret. They can then select the desired function and enter any necessary parameters. The API Explorer will then execute the request and display the response.
While the API Explorer is a useful tool, it is important to note that it should be used for testing purposes only. Users should not rely on the API Explorer for actual trading or account management. Instead, they should use the BitMEX API directly or use a trading bot that interacts with the API.
Overall, the API Explorer is a valuable tool for developers and traders who want to interact with the BitMEX API. It provides a user-friendly interface that makes it easy to test API requests and view responses. However, users should exercise caution when using the API Explorer and should not rely on it for actual trading or account management.
| Pros | Cons |
|---|---|
| Provides a user-friendly interface | Should not be relied on for actual trading or account management |
| Allows users to test API requests | Requires users to have a BitMEX account |
| Displays responses in an easy-to-read format |
Frequently Asked Questions
What is the liquidation process on BitMEX?
When a trader’s position on BitMEX falls below a certain margin requirement, the position is liquidated. The liquidation process involves the automatic closure of the trader’s position by the system. BitMEX uses a Mark Price to determine when a liquidation occurs. The Mark Price is the average of the last traded price on BitMEX and the price of the underlying asset.
How does the BitMEX funding rate affect liquidations?
The BitMEX funding rate is a mechanism used to ensure that the price of the perpetual contract remains close to the underlying asset price. When the funding rate is positive, long positions pay a fee to short positions and vice versa. If a trader’s position is open during a funding period, they may be required to pay or receive funding fees. If a trader does not have sufficient funds to pay the funding fees, their position may be liquidated.
What is the difference between BitMEX perpetual and futures contracts?
BitMEX offers both perpetual and futures contracts. Perpetual contracts do not have an expiry date and can be held indefinitely. Futures contracts have an expiry date and settle at a predetermined price. The main difference between the two is that perpetual contracts do not require traders to roll over their positions, while futures contracts do.
What are the fees associated with BitMEX liquidations?
BitMEX charges a liquidation fee of 0.5% of the value of the position liquidated. This fee is deducted from the margin balance of the trader’s account. In addition, traders may be required to pay funding fees if their position is open during a funding period.
Can non-US traders use BitMEX?
Yes, BitMEX is available to traders from around the world, except for residents of the United States, Québec (Canada), Cuba, Crimea and Sevastopol, Iran, Syria, North Korea, and Sudan.
What is the maximum leverage limit on BitMEX?
BitMEX offers leverage of up to 100x on some contracts. However, the maximum leverage limit may vary depending on the specific contract and market conditions. Traders should be aware of the risks associated with high leverage and use it responsibly.
| Sub-Section | Relevant Data/Comparisons |
|---|---|
| What is the liquidation process on BitMEX? | Margin requirements and Mark Price |
| How does the BitMEX funding rate affect liquidations? | Funding rate calculation |
| What is the difference between BitMEX perpetual and futures contracts? | Contract expiry and rollover |
| What are the fees associated with BitMEX liquidations? | Liquidation fee and funding fee |
| Can non-US traders use BitMEX? | Restricted countries |
| What is the maximum leverage limit on BitMEX? | Leverage limit and risks |