Today's content is a lesson I learned from my own trading experience that cost me 300,000.
I originally thought I could quietly accept this, but the day before yesterday when the ETH price hit 4887 USD, two internal students also encountered this issue.
For this reason, I decided to share the lessons I learned this year costing me 300,000.
At least after you understand, you can lose at least 300,000 less in the process of trading large amounts!
Have you encountered such issues in your contract orders?
Why was my order not closed for profit on Binance?
Why? The price on the candlestick clearly has already been reached.
But why was there no profit taking for it???
Why? Why was I liquidated even though the price hadn't reached?
Why?
First, partners who encounter such issues during profit taking are actually top-level players in trading.
Because for assets like ETH, such situations normally do not have a price difference exceeding 2 USD, usually around 1 USD.
So where is the problem?
The answer is hidden in the difference between the 'mark price' and the 'latest price'.
Today, Yongqi will deeply analyze based on Binance's latest contract rules and my own painful experiences.
1. There are three price systems in Binance exchange.
In Binance contracts, prices are not singular but rather a 'three-layer structure':
1️⃣ Index Price: A weighted average from several spot exchanges, serving as a 'fair anchor'.
2️⃣ Mark Price: The smooth price adjusted by index price + premium/funding rate. Mainly used for: determining forced liquidation, calculating unrealized profits and losses.
3️⃣ Latest Price: It's the price at which transactions actually occur in the market; it determines whether an order is executed and is the price shown on the candlestick chart.
Key point: These three prices at the same time point are different; sometimes extreme market conditions can lead to significant differences!
Especially during sharp rises and falls, this is why sometimes your orders don't execute for profit, and why it feels like you will be liquidated early or the price has dropped below but you were not liquidated!!!
2. Let's see what my 300,000 lesson was like?
This happened in the first half of this year, during the Ethereum rebound to 2860!
This was the mark price I set: ETH contract price 2858 USD.
On that day, the price in the exchange's candlestick chart reached: 2860.59 USD.
Moreover, I had entrusted the price three days in advance, on February 21, the price reached that amount on the night of the 23rd, and I canceled the order after consulting customer service on the afternoon of the 24th.
This is an explanation during the consultation process with Binance customers.
And detailed records:
Then you see the key points:
The following picture is what the Binance customer service sent me in the above chat record.
At that time, I was placing an order at the mark price:
And the highest mark price on Binance is: 2852.87 USD.
The highest price of the spot is: 2860.59 USD.
And my order price placed three days in advance was: 2858 USD.
Given that the spot price was already 2860.59, there was no reason for my contract at 2858 not to execute!
But the reality is there was a gap of a full 8u, causing me to lose so much that my profit of 235500u was spent on this lesson.
This is the lesson of not having researched the rules in advance.
3. Which price should be used to trigger profit and loss?
Binance allows profit/loss stop choices based on trigger prices:
Mark price trigger: stable, not easily mistriggered by spikes.
Latest price trigger: closer to the market trend, suitable for short-term breakouts.
Yongqi suggests:
High-frequency/breakout trading: use 'latest price trigger'.
Swing/trend trading: use 'mark price trigger'.
Why is it that when the liquidation occurs, even though the spot price has fallen below, your order has not been liquidated?
If the liquidation is determined by the 'latest price', a single 'spike' could wipe out a healthy position.
But Binance uses the mark price to determine forced liquidation, avoiding harm from abnormal transaction prices.
4. Common operational mistakes during trading?
Error 1: Treating the mark price as the index price.
Correct: mark price ≠ index price, but rather index price + premium adjustment.
Error 2: All stop losses use the latest price for accuracy.
Correct: Use mark price triggers for highly volatile markets for more stability.
Error 3: The liquidation price is the candlestick price.
Correct: The liquidation price is based on the mark price.
5. Summary
The mark price is the 'North Star' of risk control, while the latest price is the 'pointer' of transactions.
This way, your contract trading can upgrade from 'feeling based on watching the market' to 'a system with rules to follow'.
The market is never lenient due to your ignorance.
What you take for granted is often the beginning of losses.
Everyone can see the price fluctuations, but what really determines profit and loss is the rules.
Not understanding the rules, even if you occasionally make money, it's just luck.
Understanding the rules is the true protective charm against being harvested by the market.
In the world of contracts:
The mark price is rationality.
The latest price is desire.
Only by finding a balance between rationality and desire can trading go further.
⭐ Star Mark #B Circle's Yongqi, great content not to miss ⭐
Finally: Many views in this article represent my personal understanding and judgment of the market, and do not constitute investment advice for you.
