NGKEX has the rights to speak on the issue of how to reduce contract liquidation
On February 22, 2021, Bitcoin broke through US$58,000 and reached a new high in intraday trading. However, it plummeted, falling more than US$10,000 within two days, and hundreds of thousands of leveraged retail investors liquidated overnight. There was nothing they can do, because most trading platform uses a margin system, and there is nothing to do when a position is liquidated. You can only consider yourself unlucky. Most investors in the industry are very keen on contracts because the increase in leverage allows investors’ principal and income to be magnified infinitely. However, everything has two sides. Investors only see the high interest, and they tend to ignore the other side of contract risks.
Regarding the issue of how to effectively reduce the contract liquidation rate, the NGKEX holds the decisive right to speak. It adopts a margin risk control system, which not only allows investors to amplify their returns, but also effectively avoids the risk of liquidation.
The NGKEX targets the risk control system from the world’s top exchanges. The core advantage of this margin risk control system is that it is a full-category margin risk control system, like every derivative contract of most exchanges, it corresponds to a separate margin account. Under the full-category margin system of NGKEX, no matter how many contracts or derivatives are invested, the investment portfolio formed by all investment products has only one general margin account!
Under the NGKEX’s full-storage margin system for all categories, users can greatly improve the fund utilization of the margin account. When carrying out asset allocation, it must be a diversified allocation. The allocation of different contracts is related, some are positively correlated, and some are negatively correlated. In other words, assuming a negative correlation, it can hedge part of the user’s risk. Due to the hedged risk, users do not need more margin theoretically, and the excess margin in the overall margin account can be released to purchase more contracts. Thus, under the NGKEX’s full-category margin system, the margin utilization rate has been greatly improved. However, if each contract corresponds to a separate margin, sufficient margin must be paid in accordance with the requirements of each account, and thus, part of the margin is wasted, resulting in a significant reduction in the efficiency of margin usage.
In addition, the full-category margin system can also greatly reduce the probability of users’ liquidation and penetration.
The most concerned question for contract users: “Is the probability of liquidation high?” “Will the position be liquidated due to some inexplicable reason?” “What is the loss after liquidation?” In response to these problems, the NGKEX’s risk control system can solve this. Even if the user wipes off the position, the NGKEX will use the “gradual liquidation” method to reduce the user’s loss. This is because NGKEX has a full position margin, when there is a contract liquidation that causes the margin of the entire account to be insufficient, the system will first close the contract with the user’s largest loss, then the contract with the second largest loss, and so on. When the user’s margin rate is sufficient, it will no longer be flat! Through this gradual liquidation, the loss of users can be minimized.
