How to close a position in DigiFinex margin trading

Understanding your current exposure, including the type of position, leverage, and entry price, is crucial before closing a margin trading position in DigiFinex.

Nov 25, 2024 at 07:12 pm

How to Close a Position in DigiFinex Margin Trading

Margin trading allows traders to amplify their profits by borrowing funds from an exchange. However, it also carries significant risks, and traders must manage their positions carefully to avoid losses. Closing a position in margin trading involves several key steps:

1. Understand Your Position

Before closing a position, traders should have a clear understanding of their current exposure. This includes knowing the following:

• Type of Position: Determine if you have a long (buying) or a short (selling) position.
• Base Currency: Identify the currency you borrowed to open the position (e.g., USDT, BTC).
• Quote Currency: Identify the currency you traded against (e.g., ETH, BNB).
• Leverage: Note the amount of leverage you applied to the position.
• Entry Price: Recall the price at which you opened the position.

2. Calculate Your Profit or Loss

To calculate the profit or loss on a margin position, traders can use the following formula:

Profit/Loss = (Closing Price - Entry Price) * (Position Size / Leverage)

For example, if you have a long position on 1 BTC with 10x leverage, and the closing price is $24,000 while the entry price was $23,000, your profit would be:

Profit = ($24,000 - $23,000) * (1 BTC / 10x) = $1000

3. Decide on Closing Strategy

There are several strategies for closing a margin position, each with its advantages and disadvantages:

• Market Order: This involves closing the position at the current market price, which can be risky in volatile markets.
• Limit Order: This allows traders to specify a specific price at which they want to close the position.
• Stop-Loss Order: This closes the position automatically if the price falls below a predefined level, protecting traders from potential losses.
• Take-Profit Order: This closes the position automatically if the price rises above a predefined level, locking in profits.

4. Place Your Closing Order

Once you have decided on your closing strategy, place an order to execute the trade. This can be done through the DigiFinex trading interface.

• Market Order: Simply select the "Market" option in the order window.
• Limit Order: Choose the "Limit" option and specify the desired closing price.
• Stop-Loss Order: Select the "Stop-Loss" option and set the trigger price where you want the order to execute.
• Take-Profit Order: Similar to a stop-loss order, but with the trigger set at a price where you want to realize profits.

5. Monitor Your Order

After placing your closing order, monitor it to ensure it executes as intended. In volatile markets, prices can move quickly, so it's important to stay alert to any changes.

6. Close the Position

Once your order has been executed, the position will be closed and the borrowed funds will be returned to your account. Any profits or losses from the position will be reflected in your trading history.