How to avoid liquidation of a futures bot

Let’s imagine that your futures bot, launched with the Long algorithm, has filled the entire grid of orders and the liquidation price is very close.

There are several ways to save the situation.
Let’s look at some of them:

1st method

Split the margin

Transfer additional funds to the futures balance to replenish the safety margin. The more funds transferred, the further the liquidation price will move.

Advantages:

• A clear and easy-to-implement way to move the liquidation price.

Disadvantages:

• If the market continues to fall strongly, then additional funds may not be enough, and then both the funds that were on the balance sheet and those funds that were transferred additionally are liquidated.

2nd method

Manually open an opposite position in the same coin with the Short algorithm

To do this, you need to go to the Binance terminal.

1. Select the order type “Market”
2. Specify the number of coins to open a position
3. Click the “Open Short” button

It is recommended to indicate the volume of the Short position (number of coins) at first small – approximately 30-50% of the volume of the Long position. If the decline continues, additional short volume can be opened later, thereby moving the liquidation price even further.

We get the following situation:

As you can see, the liquidation price decreased – it was 97.31, and after the opening of the Short position it became 82.54

It is important to note that the use of the Short position primarily serves to save from liquidation. And only if you have the proper experience on Short, you can make money – when the fall stops, you can close the Short position, fixing the profit and thereby replenishing the margin for the Long Bot.

Warning!

After opening a Short position, you need to put a stop loss (the stop price is approximately 1.5-3% of the entry price) to close the position if the market turns up sharply! (for this purpose, a small volume of Short is first opened to get a small loss on the stop).

3rd method

Gradual reduction of the Long position

Warning! The method is obviously unprofitable, but it allows you to avoid complete liquidation and save part of the balance.

If the price continues to fall, then you can sell the Long position in parts. To do this, you need to go to the Binance terminal and find the section for closing the transaction in the upper right part of the screen.

1. Select the order type “Market”
2. Specify the number of coins to close the position
3. Click the “Close Long” button

It is recommended to sell the position on the upward chart rollbacks, then the loss will be slightly less.

Advantages 

• Salvation from the liquidation of part of the balance

Disadvantages

• Losses

P.S. General recommendations for trading bots in the futures market:

• Strictly follow risk management. Without accumulated experience, do not use large leverage over x10.
• Use for trading only coins with large capitalization, which are not subject to sharp price fluctuations within a short period of time (BTC, ETH, BNB, etc.)
• When launching the bot, ensure that there are free funds on the futures balance, which will be used as a maintenance/safety margin.

In general, it is recommended to provide each of the running bots with the balance that is equal to its 2 * MAE (Maximum Adverse Excursion) according to the results of the annual backtest.

How to conduct and analyze a backtest is described in our material:

https://help.veles.finance/en/backtests/

• Do not run futures bots with the Short algorithm!
• When creating a futures bot, use a larger price change overlap than for a spot bot – from 30% or more. – Monitor Liquidation Price and Margin Ratio in Binance Terminal

With coefficient values above 8-10%, start taking preventive actions using the methods described above.

Do you want to better understand Veles bot strategies and the market? Learn our Wiki: https://help.veles.finance/en/