What to do if Crypto.com leverages liquidation?

By setting realistic leverage ratios, maintaining a margin cushion, and closely monitoring positions, traders can aim to avoid the potential for liquidation and mitigate its impact when necessary.

Nov 25, 2024 at 09:17 pm

What to do if Crypto.com Leverages Liquidation?

Understanding Leveraged Trading

Leveraged trading amplifies your trading capacity by borrowing funds from a broker. While this magnifies potential profits, it also exposes you to significant risks, as losses can exceed your initial investment.

Recognizing the Signs of Impending Liquidation

Crypto.com may send notifications or warnings if your account balance falls below the maintenance margin level, which is typically around 20%. Other signs include:

• A sharp decline in the value of your underlying asset
• Reduced buying or selling power within the account
• Margin interest charges accumulating rapidly

Steps to Avoid Liquidation

• Monitor Your Positions Regularly: Track market fluctuations and adjust positions as necessary to prevent margin calls.
• Set Realistic Leverage Ratios: Don't overextend yourself by borrowing more than you can safely repay. Consider your risk tolerance and financial situation.
• Maintain a Margin Cushion: Keep a sufficient margin balance to cover potential losses and margin interest.
• Close Losing Positions Early: If a position is moving against you, consider closing it to limit further losses.
• Deposit Additional Funds: Increase your account balance by transferring more funds, which will reduce your leverage ratio and increase your margin cushion.

Steps to Mitigate the Impact of Liquidation

• Contact Crypto.com Support: Reach out to the support team to explore options for repayment arrangements or pausing liquidations.
• Identify Options for Repayment: Consider selling assets within the account or external funds to repay the borrowed funds.
• Negotiate a Payment Plan: Negotiate a repayment plan with Crypto.com that aligns with your financial capabilities.
• Seek Professional Advice: If necessary, consult with a financial advisor or bankruptcy attorney to explore your options and protect your financial interests.

Additional Tips

• Educate Yourself: Familiarize yourself with the risks and strategies of leveraged trading before engaging in it.
• Avoid Emotional Trading: Don't make impulsive trades based on fear or greed.
• Diversify Your Portfolio: Hold a mix of assets to reduce your exposure to any single asset's performance.
• Manage Your Expectations: Understand that leveraged trading is a high-risk endeavor, and potential losses can exceed your initial investment.
• Consider Hedging Strategies: Explore options like stop-loss orders or hedging derivatives to mitigate risk in leveraged positions.