How BitMEX Stop-Losses Can Save you 70% of your Capital, and How to Set up a Stop
NEWS 13 Sept 2018: AntiLiquidation.com is a BitMEX Anti-Liquidation Tool & Leverage Calculator. This free tool will save you up to 70% of your capital in losing trades. It also enables up to 700x leverage via tight Stop placement. Use for Risk Management & to improve your bottom line at BitMEX.
AntiLiquidation.com is configurable so you can input your own risk numbers. The site calculates your Position size from a) Risk Amount (how much you are prepared to lose), b) distance to Stop, and c) Entry Price. A checklist takes you through the structuring of a good trade that avoids all possibility of Liquidation and ‘blowing up’ your account.
There is a a Guide to accompany use of the AntiLiquidation tool: How to Use the BitMEX Anti-Liquidation Tool.
There are two ways to exit a margin trade that goes the wrong way at BitMEX: with a) Liquidation or b) a Stop-Loss. Using a Stop-Loss quite adjacent to your Liquidation Price can save you up to 70% of your capital.
Let’s walk through this example:
You buy 100,000 XBTUSD with 100x Leverage at 6357. The Cost shown in the BitMEX Calculator is 0.1816 BTC:
A. Exit through Liquidation
Your Liquidation Price is 6326.
Now if we input that Liquidation Price into the Profit/Loss Calculator (below) as our Exit Price, we see that a price decrease of 0.49% liquidates us.
Now this is important. Our Loss is not 0.077 BTC as the Profit/Loss Calculator reports! We are liquidated and our loss is our Initial Margin of 0.1816 BTC. The Profit/Loss Calculator does not account for Liquidation. This is a serious software bug.
B. Exit through Stop-Loss
Now look at the results if we set a Stop-Loss just above our Liquidation Price of 6326 at 6328.
The Calculator shows a Loss of 0.0720. (This is correct. My sheets give the same value.) So the simple act of setting a Stop-Loss means our loss is 0.0720 and not 0.1816. The saving is 0.1096 BTC.
Going back to the original worked example in the Tweet:
The saving from the Stop-Loss is 60% of our Equity:
Saving is 70% When Fees Accounted For
When you get Liquidated you pay the 0.075% Taker Fee on your entire position of 100,000 contracts. That is Arthur rubbing salt in your wound.
When you exit with a Stop-Limit order you receive a 0.025% Rebate. The saving on fees with the Stop-Loss Limit Order is 0.001% x 100,000 / 6357 = 0.0157 BTC. Add that in and our Total Saving is 70%.
How to Set-Up a Stop-Loss
HT @ Onemanatatime for illustration
A Stop Market Order is a market order that is triggered (opens) when your stop price is hit. You pay the Taker Fee of 0.075%.
Our Stop-Market order:
With our Entry at 6357, we place a stop-market sell order at 6328. This triggers if the price trades anywhere below $6328. A market sell is made.
Our Stop-Limit order:
With our Entry at 6357, we place a stop-limit sell order at 6328. This order triggers if the price trades anywhere below $6330. A sell is made if the price trades at any price ≥ 6328.
It is plain stupid to select any leverage > 25x for reasons concerning Maintenance Margin that I have explained elsewhere. The purpose of the worked example we looked at is simply to show how exit via Stop Loss is always better than exit via Liquidation. So a combination of maximum 25x Leverage and use of Stop Loss (Stop-Limit variant) is best practice and you are good to go.