Every new crypto trader should learn about Bybit liquidation before they start buying or investing in crypto. This is an essential aspect to know about as it can cause quite the difficulty for people who dive into trading crypto without proper information and knowledge.
Liquidation basically means to sell the assets for cash, which in this case would be the digital assets. If the crypto traders are not careful while trading they can end up liquidating their assets by force, which is not beneficial. However, if the potential crypto traders learn about the concept and how they can avoid it, crypto trading can become easier for them.
Therefore, if you are also new to the crypto space and want to use Bybit then you should be familiar with aspects such as liquidation price Bybit and more before you begin.
Here is some essential information you should know.
What is Bybit Liquidation?
Bybit is one of the most popular and biggest crypto exchanges in the crypto market. It is especially known among the crypto traders who opt for trading with leverage.
If you want to use the Bybit exchange then you also need to be familiar with the concept of liquidation, especially if you want to start trading crypto.
Liquidation on an exchange occurs when a crypto trader loses all or part of their initial margin. When this happens, the trading position of the trader is closed, which is called liquidation. There are different types of liquidation that are subject to different conditions and as a novice trader you should be familiar with these.
Types of Liquidation
People who want to start trading crypto should be familiar with Bybit liquidation. However, knowing about the different types of liquidation is equally important.
If you know the types of liquidation and how they occur, it can help you understand how you can avoid them too.
There are two types of liquidation namely:
- Partial liquidation
- Total liquidation
Both these types of liquidation are explained in a little more detail below.
The name of this type of liquidation indicates what it is. Partial liquidation is the type where the position of a trade is closed partially and a little earlier to reduce how much position and leverage is used by the trader. While the traders wait for potential profits, the crypto exchange is vulnerable to a lot of risk. This type of liquidation helps reduce the risk faced by the exchange.
The second type of Bybit liquidation is called total liquidation and is somewhat obvious from the name. This type of liquidation is the one where the position of a trader is closed when all of the trader’s initial margin is used. As compared to partial liquidation, this type is a safer option for the crypto trader. This is because total liquidation does not take away any profits of the crypto traders.
When Does Bybit Liquidation Occur?
There are several aspects of crypto trading one should be familiar with, especially if they are new to the crypto space. Starting crypto trading without having proper information can complicate the overall experience and can even make the traders susceptible to some security risks.
This applies whether you use a popular crypto trading platform such as Bybit or a local exchange.
As mentioned earlier, Bybit is one of the most popular crypto exchanges in the market and supports crypto trading.
If you are new to crypto trading and want to know how Bybit liquidation occurs then you should know that it occurs when the mark price hits the liquidation price.
Mark price, also known as spot price, is an average price. This price is calculated from the prices taken from several major crypto exchanges. Therefore, when it is said that the mark price hit the liquidation price, it means that the last traded price does not trigger liquidation. Instead, that price is used to determine the price at which a trading position closes.
How to Avoid Liquidation?
Liquidation on the Bybit exchange can be avoided if the traders start adding margin to their trading positions. If you are using Bybit, you can add margin by using:
- Isolated Margin mode
- Auto-margin Replenishment
Isolated margin mode requires the traders to add margin manually. Whereas, the auto-margin replenishment adds the margin automatically.
Adding margin by using any of the two options mentioned above offers flexibility to the traders and helps them in maintaining their positions while avoiding Bybit liquidation.
Bybit liquidation is one of the most important aspects of crypto trading you should know about, especially if you are new to the crypto space. As a novice trader and user of Bybit, you should have the information mentioned above.