Explanation of Automatic Position Closure on Binance
Dear [Your Name],
We understand your concern regarding the automatic closure of your Ethereum position. Based on your description, here’s a concise explanation:
Why Your Position Closed Automatically:
1. Liquidation (Forced Closure) Due to Insufficient Margin:
- Your short position at $3,255 likely faced significant losses as Ethereum’s price rose sharply (e.g., to ~$4,200+). When losses deplete your margin balance below the maintenance margin level, Binance’s system automatically liquidates the position to prevent further losses.
- Ethereum’s price volatility in August 2025 (e.g., reaching ~$4,900) triggered widespread liquidations, especially for leveraged shorts.
2. Impact of High Leverage:
- If you used high leverage (e.g., 10x or more), even a small price move against your position can quickly trigger liquidation. For instance:
- A 10x leveraged short could be liquidated if ETH rises by ~10% from your entry point.
- Data shows that leveraged positions are highly vulnerable during market surges.
3. Market Volatility and Liquidation Cascades:
- Recent Ethereum price surges (e.g., due to Fed rate cut signals or institutional demand) caused cascading liquidations, wiping out over $388 million in long positions in a single day. Your short position may have been caught in this volatility.
4. No Partial Liquidations on Binance:
- Binance typically liquidates the entire position if margin levels are not restored promptly.
Key Recommendations to Avoid Future Liquidations:
- Reduce Leverage: Use lower leverage (e.g., 3x–5x) to withstand price swings.
- Monitor Margin Levels: Add funds to your margin account if prices move against you.
- Set Stop-Loss Orders: Predefine exit points to limit losses manually.
- Avoid Overexposure: Ensure your portfolio is diversified and not overly concentrated on one trade.
Additional Context:
- Binance Guide on Liquidation: [Understanding Liquidation](https://murmurcats.com/what-is-liquidation/)
