Liquidation protection in MagicTradeBot is a safety mechanism designed to protect your capital when using Funding Farming. Since the strategy involves hedged Spot + Futures positions, the bot continuously monitors the Futures positionโs proximity to liquidation.
๐น How It Works
Monitor Futures Risk
The bot tracks the distance between the current Futures price and the liquidation price
Liquidation occurs when margin requirements are breached, potentially causing a full loss of the leveraged position
Emergency Close Trigger
If the price moves too close to the liquidation threshold, defined by
liquidation_percent, the bot automatically closes both Spot and Futures positionsExample:
liquidation_percent: 5โ positions are closed when within 5% of liquidation price
Capital Preservation
By closing positions before liquidation, the bot prevents forced liquidations
- Ensures you retain your Spot holdings and part of your Futures capital
๐น Key Benefits
| Feature | Benefit |
|---|---|
| Early liquidation monitoring | Reduces risk of catastrophic loss |
| Automatic closure of both positions | Maintains hedge integrity and preserves capital |
Configurable threshold (liquidation_percent) |
Allows tuning based on risk tolerance and exchange leverage |
๐น Practical Example
- BTC Futures liquidation price: $50,000
- Current price approaches $52,500
liquidation_percent = 5โ 5% above liquidation- MagicTradeBot closes both Spot and Futures trades automatically
- Result: Capital is preserved, and hedge positions are safely exited
โ Key Takeaways
- Liquidation protection safeguards your funding farming positions
- Bot monitors Futures liquidation proximity in real-time
- Positions are automatically closed if the threshold is reached
- Essential for capital preservation in leveraged hedged trades