What is the difference between margin call and liquidation in the context of cryptocurrency trading?

3 answers

• Mar 22, 2022 · 3 years ago
  A margin call occurs when the value of a trader's margin account falls below a certain threshold set by the exchange. This triggers a request for additional funds to be deposited into the account to meet the required margin. Failure to meet the margin call may result in the liquidation of the trader's position. It is important for traders to closely monitor their margin accounts to avoid margin calls and potential liquidation.
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• Mar 22, 2022 · 3 years ago
  Margin call and liquidation are two terms commonly used in cryptocurrency trading. A margin call is a warning from the exchange that the trader's account is at risk of falling below the required margin. It serves as a reminder for the trader to deposit more funds into the account to maintain the required margin. On the other hand, liquidation occurs when the trader's position is forcibly closed by the exchange due to insufficient funds in the margin account. This is done to protect the exchange and other traders from potential losses. Understanding the difference between margin call and liquidation is crucial for managing risk in cryptocurrency trading.
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• Mar 22, 2022 · 3 years ago
  BYDFi, a leading cryptocurrency exchange, explains that a margin call is a notification sent to traders when the value of their margin account drops below a certain level. It serves as a warning that additional funds need to be added to the account to meet the required margin. Failure to meet the margin call may result in the liquidation of the trader's position. Liquidation, on the other hand, is the process of closing a trader's position when their margin account no longer has sufficient funds to support the position. It is important for traders to understand the difference between margin call and liquidation to effectively manage their trading strategies.
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