Position, the key determinant

Position, the key determinant 

- adjustable leverage is a real risk rather than high leverage

High leverage = high risk? 

This is a misunderstanding of amateurs, even a misconception advocated by many other exchanges.

actually, the high leverage is not equaled to high risk. Sometimes it even has nothing to do with risks. 

For example, A expects BTC to appreciate and long the contract worthy of 1 BTC. Regardless of whether the leverage provided by this platform is 100 times or 20 times, when BTC's market price drops by 100 points, your loss is always 100 USDT. The leverage does not affect profits and losses. 

04.png


Therefore, what makes a difference is your “Position Management” rather than the leverage, which means if you put all 100 bucks as margin or just 10 when you only have 100 in total? 


◆  Which is safer? 100x or 20x leverage? 

Here is an example: as shown above, in BEX500 web trading terminal, there are 500 USDT in A account with the current BTC price at 9935 USDT. A longs 1 BTC worth of contract at the market price. When the margin ratio is 30%, the forced closeout is triggered. 

Thus, is 100x leverage more risky? 

It can be laid out in the chart below

05.png


A conclusion can be drawn from the above case: the position with a 100x leverage can withstand more intense volatility. 

with 100x leverage, the BTC price falls 4.7% before it hits forced liquidation. 

with 20x leverage, only 3.5% decrease triggered forced close-out. All position will be liquidated. 

Why is the fact far different from our prototype? 

That's because–the “position management” with 100x leverage is more reasonable. 


◆ Position Management, your trading safety net

The key in case above, rather than “leverage”, is “available margin”. 

There are still 400.65 USDT available to open positions in the case of 100x leverage, while only 3.25 USDT left in the one with 20-time leverage. 

The available margin can be referred to as your safety net. 

As the cushion gets thicker, it, naturally, can withstand more fluctuations. 

No matter what leverage is given by the platform, you, as a mature trader, have to understand the “position management”. 


◆ How to calculate the position? 

what is the algorithm to calculate position? 

Here is a concept you can apply -- actual leverage. 

Actual leverage = contract value/total asset

For example, if you hold a position of 1-btc worth of contract with 500 USDT, and the actual leverage is 9935/500=19.87 times. 

In the case with 100x leverage above, the actual leverage for A is only less than 20 times, the same as the one with 20x leverage. However, more available margin is left for market volatility.

How do we manage the position other than calculate “actual leverage” and “available margin”? 


We will continue with more follow-up courses. A series of live broadcasts concerning the position is to be launched. Feel free to contact the customer service to place an order! 

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