Leveraged trading question

[magneto]

On Deribit (and I think Bitmex also, but I'm not entirely sure since I don't use them), there is a parameter to your position that states the liquidation price, i.e., when your equity falls below the maintenance margin, under which you're forced to liquidate your positions.

However, what I've found is that this price is only indicative of when liquidation STARTS to occur, and not when you're actually fully bankrupt and all your positions are liquidated.

Is there a way to calculate the price at which that occurs? Is liquidation a linear process or dynamic according to market conditions?

[exstasie]

On Deribit (and I think Bitmex also, but I'm not entirely sure since I don't use them), there is a parameter to your position that states the liquidation price, i.e., when your equity falls below the maintenance margin, under which you're forced to liquidate your positions.

However, what I've found is that this price is only indicative of when liquidation STARTS to occur, and not when you're actually fully bankrupt and all your positions are liquidated.

Is there a way to calculate the price at which that occurs? Is liquidation a linear process or dynamic according to market conditions?

There's no way to calculate that because it depends on order book liquidity at the time of liquidation. It also depends on volatility because Deribit does incremental/partial liquidations. When margin balance drops below maintenance margin, they liquidate 12.5% of your position at market. They stop auto-liquidating once your equity is higher than maintenance margin again so you won't necessarily get fully liquidated.

On perpetual swap or futures, maintenance margin = 0.575% and liquidation fee = 0.5%. So in theory, assuming there is adequate liquidity, Deribit would let you keep leftover maintenance margin (up to 0.075%) if your position was completely liquidated. Bitmex takes it all no matter what.

https://www.deribit.com/pages/docs/general
https://www.deribit.com/pages/docs/perpetual
https://www.deribit.com/pages/information/fees

[magneto]

On Deribit (and I think Bitmex also, but I'm not entirely sure since I don't use them), there is a parameter to your position that states the liquidation price, i.e., when your equity falls below the maintenance margin, under which you're forced to liquidate your positions.

However, what I've found is that this price is only indicative of when liquidation STARTS to occur, and not when you're actually fully bankrupt and all your positions are liquidated.

Is there a way to calculate the price at which that occurs? Is liquidation a linear process or dynamic according to market conditions?

There's no way to calculate that because it depends on order book liquidity at the time of liquidation. It also depends on volatility because Deribit does incremental/partial liquidations. When margin balance drops below maintenance margin, they liquidate 12.5% of your position at market. They stop auto-liquidating once your equity is higher than maintenance margin again so you won't necessarily get fully liquidated.

On perpetual swap or futures, maintenance margin = 0.575% and liquidation fee = 0.5%. So in theory, assuming there is adequate liquidity, Deribit would let you keep leftover maintenance margin (up to 0.075%) if your position was completely liquidated. Bitmex takes it all no matter what.

https://www.deribit.com/pages/docs/general
https://www.deribit.com/pages/docs/perpetual
https://www.deribit.com/pages/information/fees

Thanks for the response.

Just out of curiousity, though, has there practically been any scenarios where a position has not fully liquidated after the first 12.5%, and somehow came back at the end to reap a profit? I've personally never experienced it given that BTC markets are extremely volatile and thus can create a flurry of dumps/pumps within a single candle.

Also, from your perspective, would you recommend holistically Bitmex or Deribit for trading?

[exstasie]

There's no way to calculate that because it depends on order book liquidity at the time of liquidation. It also depends on volatility because Deribit does incremental/partial liquidations. When margin balance drops below maintenance margin, they liquidate 12.5% of your position at market. They stop auto-liquidating once your equity is higher than maintenance margin again so you won't necessarily get fully liquidated.

On perpetual swap or futures, maintenance margin = 0.575% and liquidation fee = 0.5%. So in theory, assuming there is adequate liquidity, Deribit would let you keep leftover maintenance margin (up to 0.075%) if your position was completely liquidated. Bitmex takes it all no matter what.

https://www.deribit.com/pages/docs/general
https://www.deribit.com/pages/docs/perpetual
https://www.deribit.com/pages/information/fees

Thanks for the response.

Just out of curiousity, though, has there practically been any scenarios where a position has not fully liquidated after the first 12.5%, and somehow came back at the end to reap a profit? I've personally never experienced it given that BTC markets are extremely volatile and thus can create a flurry of dumps/pumps within a single candle.

I can't say from experience. I trade on Deribit (though I'm leaving soon because they're implementing KYC) but I've never been liquidated there. I can say this though: if you get partially liquidated, ending in profit is extremely unlikely no matter what. If you were on low leverage, the market probably won't recover to break-even. On high leverage, you're likely to get fully liquidated if you don't close out the rest.

Also, from your perspective, would you recommend holistically Bitmex or Deribit for trading?

Bitmex = better UI and deeper liquidity. Deribit is fine if you're a small to medium sized trader, but if you need to move 100+ BTC in and out of the market quickly then you need Bitmex.

Having said that, Deribit's trading engine is much superior. No lag, and unlike Bitmex, stops execute exactly when they are supposed to. That's why I prefer it.

[hello_good_sir]

would you recommend holistically Bitmex or Deribit for trading?

For a beginner/intermediate trader I'd say that Deribit is probably better.

You have sufficient liquidity most of the time on the orderbooks (goes without saying that Bitmex is still king in this area, though) and you can find answers very easily by asking questions on Telegram. Their withdrawals are also instant, while Bitmex you need to wait for up to a day potentially.

Also, AFAIK deribit has spontaneous funding rates which means that there is no major market disruption every time the designated funding time for positions comes close. That provides more continuity in your position compared to Bitmex's intervals.