I have wanted to explore futures with some risk capital I have. Ok so, I understand liquidation price and leverage (I think). So say I go LONG the ETHUSDT Contract (let's assume it's one that expires so that funding fee can be ignored) and pay my initial margin. Then it goes into loss. Assume that my ROE is now beyond NEGATIVE (-) 100%. Case 2 below shows an example on when this may happen.
From what I understand, after I pay my initial margin, I do not have to pay anything more until I get liquidated. Am I correct to understand that?
What happens if I close my position when my ROE is a high negative amount (eg. -193%, as shown below). I understand that because this is on margin, I can lose beyond 100%. But that contradicts the previous statement about not having to pay until I get liquidated. Do I have to top up extra money when closing my trade?
I apologize if this is confusing. I myself am a bit perplexed on this matter. I always set stop losses so I want to know where to set a stop loss to prevent myself from losing anything beyond what my wallet has.
| Case 1 | Case 2 | |
|---|---|---|
| Wallet Balance | 2500 USDT | 2500 USDT |
| Entry Price | 3100 USDT/ETH | 3100 USDT/ETH |
| Leverage\* | 2x | 20x |
| Initial Margin\* | 1550 USDT | 155 USDT |
| Liquidation Price* | 612.24 | 612.24 |
| PNL when Exit Price = 3400* | 300 USDT | 300 USDT |
| ROE when Exit Price = 3400\* | 19.35% | 193.55% |
| PNL when Exit Price = 2800* | -300 USDT | -300 USDT |
| ROE when Exit Price = 2800\* | -19.35% | -193.55% |
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