What Is the Purpose of a Stop-Loss Order in Relation to the Margin Ratio?
A stop-loss order is a risk management tool designed to automatically close a position at a pre-determined price, limiting potential losses. Its purpose in relation to the margin ratio is to close the position before the margin ratio drops to 100%, thereby preventing a forced liquidation and avoiding the associated liquidation fee and potential deficit risk.
Glossar
Risk Management Tool
Hedging ⎊ Derivatives serve as essential instruments for offsetting unwanted market sensitivities within a broader portfolio of crypto assets.
Margin Ratio
Threshold ⎊ The specific ratio, expressed as a percentage or fraction, comparing the current margin balance to the required margin level for a given position, which dictates the risk status of the account.