Hello everyone,
I'm trying to understand the kraken.com trading basics. I read their faq etc and I have understand quite a few new things and yet, others not quite yet.
About positions.
I see "close" and "settle" and some volume percentages to chose from.
Can someone help me understand the difference between close and settle?
I'd appreciate it a lot!
thanks
Hi @PurpleDog - I work for Kraken and manage our thread on this board. Ignoring what's going on "under the hood," and ignoring fees for simplicity, here's a functional description of the difference between "close" and "settle" in terms of how you end up in a different place with the two options.
Suppose you used a leveraged buy order to go long 1 BTC @$1000. Now you exit the position @$1200. If you use the "close" option, you will end up with a $200 increase in your USD balance and no increase in your BTC balance compared to your balance before you opened the position. If you instead use the "settle" option, you will end up with a $1000 USD decrease and a 1 BTC increase in your balances. With the settle option you still effectively have a $200 USD profit, because you have effectively purchased 1 BTC at a price of $1000 USD but that coin is currently worth $1200. If BTC price continues to rise after you exit the position, then you are better off holding the BTC. But if BTC price declines after you exit the position, then you are better off locking in the profit in USD. So the choice depends on how you think the market will go or whether you want continued exposure in BTC or in USD after exiting the position. I hope this helps clear things up.
As for the volume percentages, if I'm correct in assuming what you are talking about, that governs how much of your net positions you want to close. So if you are net long 10 BTC, 50% will close 5 BTC of the positions, 100% will close all of the positions, and 200% will close all of the long positions AND open a 10 BTC short (so you are closing the long and flipping to the short side in one trade). Be careful about using this tool though. Double-check that it is doing what you want, because I don't think it handles all situations correctly, especially if you have margin positions going in more than one currency pair.
