Bybit liquidation is an important concept that needs to be understood by the interested parties before they start crypto trading. Liquidation can be quite financially damaging to the crypto traders, especially if they are new to the crypto space.
Therefore, it is very important for every novice party to first learn about it and get the basic understanding so they know how to avoid it and trade with minimum inconveniences.
In simple words, liquidation means selling an asset (a digital asset in this case) for cash. People who start crypto trading and are unable to meet the margin requirements for the leveraged position, end up experiencing forced liquidation.
This is why it is crucial for you to learn about liquidation price Bybit and other factors so you can make an informed decision and trade easily.
Bybit Liquidation – What to Know About it
Liquidation is related to margin trading. This is because, if you are a margin trader and you lose all your initial margin, your trading positions will be closed. This is called liquidation and it occurs when leverage is used while trading. It also occurs if you place a trade with a contract and its value is extracted from a digital asset.
There are different types of liquidation and other details such as liquidation price Bybit that are mentioned in detail below.
Types of Liquidation
As mentioned above, Bybit liquidation is an essential factor that needs to be understood by the interested parties. Apart from knowing the definition of liquidation, you should also know that there are two types of liquidation.
Both the types of liquidation are mentioned here so you can understand how they are different and affect the crypto traders differently.
This is one of the types of liquidation. We have already established that once the initial margin of a trader is lost the position is closed. Total liquidation occurs when all or almost all of the initial margin of a trader is used. This results in the closing of the trader’s position. As compared to the other type of liquidation, total liquidation is a safer option for crypto traders because it does not take away any profits made by the traders.
The other type of Bybit liquidation is partial liquidation. As the name suggests, this type of liquidation occurs when the trading position of a trader is closed partially earlier, which reduces how much of the position and leverage is used by the trader. Partial liquidation is more helpful for the exchange as it keeps the platform from experiencing a lot of risk while the traders wait for potential profits.
Understanding Liquidation on Bybit
Apart from liquidation price Bybit and types of liquidation, you should also be familiar with how it occurs on the Bybit exchange.
Bybit is one of the most popular crypto exchanges and it aims to make crypto trading and investing easy and somewhat safer for the interested parties. Understanding the technical information and factors such as liquidation can be of great help.
When the mark price hits the liquidation price on Bybit, that’s when liquidation occurs on the platform.
What is Mark Price?
Mark price is an important aspect that causes Bybit liquidation. It is also called spot price. The average calculated price from numerous big crypto exchanges is the mark price. When mark price hits liquidation price, liquidation occurs on the Bybit exchange. This means that the last traded price is not responsible for triggering liquidation. Instead, it is used to calculate the price at which the trading position is closed.
How Can You Avoid Liquidation on Bybit?
Bybit liquidation can be avoided if the crypto traders take their time to understand it better before they begin trading digital assets. Therefore, if you are interested in trading crypto but you want to avoid liquidation, then you can do so by adding margin to your trading positions.
You can either add margin to your positions through Auto-margin Replenishment or you can do so by using Isolated Margin mode.
Auto-margin Replenishment automatically adds margin, whereas Isolated Margin mode enables the traders to add the margin manually.
The two modes mentioned above are of great value for crypto traders who want to avoid Bybit liquidation. This is because the Bybit exchange offers more flexibility to the crypto traders, thanks to these modes.
One of the most important factors to know about and understand is Bybit liquidation. If you are looking to start crypto trading for the first time and want to use Bybit then you need to know factors such as liquidation. As a crypto trader, you should have the information mentioned above before you start trading digital assets.