We’re pleased to confirm that, right on schedule, we onboarded another 50 traders to the mainnet yesterday. We’ll be reporting back on progress after the weekend, but in the meantime, Cryptrader is back with one of his informative videos. This time, he shares some of his top tips for managing the differences in liquidity on mainnet compared to testnet.
Cryptrader opens this video by explaining the progress in liquidity on the mainnet as we’ve onboarded new traders. Currently, we’re seeing anywhere between $20 million and $40 million in daily volume. We’re also seeing the average liquidity per tick increase to around 1,000. Bearing in mind, this is only the very beginning. Once we have thousands of traders on the ladder, we’re going to see one of the most liquid order books in the crypto space!
However, remember that currently, with only a small group trading, liquidity is far lower than it will be once the DFE launches to the public. Trading in a lower liquidity environment comes with some particular challenges.
So Cryptrader’s tips are aimed at helping traders to understand these challenges and avoid some potential pitfalls.
#1 Don’t Overleverage Yourself
Cryptrader explains that with higher leverage, there’s a greater chance of being liquidated. On the mainnet, leverage is currently limited to 10x. Lower liquidity means there’s less chance of you being able to exit your position when the price moves. So keeping leverage low offsets the risk of your position being liquidated.
Last weekend we saw epic drops in the BTC price. Cryptrader explains that with 10x leverage, a trader could be liquidated within a five-minute candle. So use leverage cautiously, particularly when liquidity is lower.
#2 Be Cautious of Market Executing Orders
Cryptrader explains with lower liquidity on the ladder, market executing orders should be used with caution, particularly if you’re working with a bigger order. Instructing a market executing order can eat through much of the liquidity on the ladder and result in slippage.
He illustrates this risk with a live trade. If you were working with an open position of 25,000 long contracts, and clicked a market executing order, the liquidity on the entire buy-side of the ladder would only be one-tenth what’s needed to close out his position.
Hopefully, these two tips will help newcomers arriving on the mainnet to understand the challenges of trading in a lower liquidity environment.