When trading on Everstrike, you can never end up with a negative balance. Even if you opened a $1M Bitcoin short position, and the price of Bitcoin spiked by 1,000%, you would not have a negative balance. The maximum that you can ever lose is the Position Margin that you use for open positions. You can never lose more than this amount. The reason for this is Everstrike's Liquidation engine. This system will automatically close out positions that are about to go bankrupt, relieving the trader from any further losses.
How It Works
The system works in the following way:
- If a position is about to go bankrupt, the system will gain temporary control of the position and evaluate whether or not to close it out.
- If the position can be closed out a favorable price (based on the present market conditions), the system will submit an Immediate Or Cancel (IOC) order on behalf of the trader for 10 percent of the position size, or 0.10 BTC (whichever is higher).
- If this order is filled, the position will be reduced in size by a minimum of 10 percent.
- Because the size of the position is now smaller, the Position Margin is now bigger relative to the Position Size than it was before. In other words, the leverage of the position decreased.
- This, in turn, also improves the Liqudation Price of the position, in favour of the trader.
- Due to the improved Liquidation Price, it is likely that the position will now exit Liquidation. In that case, control of the position will be returned to the trader.
- In case the new, improved Liquidation Price is still on the wrong side of the current Mark Price, the process above will be repeated once more.
The Goal of the System
The goal of the system is two-fold: Protect the equity of the trader and ensure that the trader never ends up with negative balance. If the market conditions are unfavorable for the trader, the system will wait until the conditions are sufficiently favorable before selling off any part of the position. Whether the conditions are deemed favorable or not will depend on the current market depth, the estimated average fill price of any potential orders and the execution price of recent trades on the given trading pair. The exact relationship between these, and the reason that it leads to a better fill price for the trader, is a trade secret that Everstrike does not make public. What It Means For You
- If your position has entered Liquidation, a small warning sign will appear next to your position in the trading interface.
- While this warning sign is there, it is not possible for you to submit new orders on the position, or cancel existing orders on the position.
- You may, of course, decrease the leverage by dragging the leverage slider left. This will increase your Position Margin and potentially bring your position out of Liquidation. You may not further increase the leverage.
- When your position exits Liquidation, the warning sign will disappear. You may submit new orders on the position 5 minutes after your position has exited Liquidation.
In an effort to bring your position out of Liquidation, the system may attempt to submit orders on your behalf. The quantity for such orders is determined by the following formula:
Order Quantity = Min(Position Size, Max(10% of Position Size, 0.10 BTC))Any orders submitted by the system are transmitted to you in real time, and you may check the details of them in your orders overview. Once your position satisfies the Minimum Maintenance Margin requirements, your position will exit Liquidation, and you will regain control of it.