Cross-Margin and Advanced Orders
0xC065
October 24th, 2022

With Kwenta cross-margin accounts deployed, kwenta is excited to now offer advanced orders like limit and stop loss orders. This gives traders some feature parity with tools available across existing exchanges and allows advanced strategies and improved risk management. Stop-loss orders help to protect traders from losing more money than they are willing to risk, while limit orders allow traders to set an optimal price they are willing to accept for a trade.

Cross-margin accounts are a unique Kwenta offering that allows users to trade any Synthetix perp market by a single account. By default, all Synthetix futures contracts are isolated markets, requiring users to deposit and withdraw separately for each asset they wish to trade. With cross-margin accounts, users can seamlessly trade different markets with fewer transactions and less hassle.

Cross-margin accounts also provide users with powerful risk management tools, letting users tailor each position to their personal trading style with an optional fee rejection parameter. This allows users to have orders rejected if the fees spike beyond acceptable levels.

Under isolated market contracts, users are forced to risk all of the collateral they deposit and can only protect collateral from liquidation by completely withdrawing the collateral they wish to protect. With Kwenta’s cross-margin accounts, users are able to select the amount of collateral they are comfortable risking when opening a position while unused collateral will stay safe in the CM account if liquidations should occur.

Gelato Keepers

Keepers can do things like execute limit orders, liquidate under-collateralized loans, and just about anything on-chain autonomously.

Making use of Gelatos keepers, Kwenta allows users to place orders which are executed automatically when future conditions are met. This allows Kwenta to offer stop loss and limit orders. Users submit an advanced order type, where Gelato keepers monitor the order and execute it when the conditions are met. Due to this development, no more manual intervention is needed from traders on Kwenta to execute orders once an advanced order is set.

In order to execute onchain advanced orders, traders will need to have .01 ETH deposited for their margin accounts keeper. This will be done automatically when you place an advanced order. This balance will continuously be brough back to a .01 ETH anytime a new advanced order is placed and the balanace is below .01.

What are Limit Orders?

Limit orders offer traders freedom & peace of mind when it comes to how they trade. They allow you to set the price at which you are willing to buy or sell an asset rather than taking the current market price. This can be helpful when you are looking to buy an asset below its market price if intentions are to go long or sell an asset above its market price if intentions are to go short.

Limit orders are a great way to avoid buying or selling too early or too late, or having to be at your screen all day to trade. Kwenta limit orders will execute when the oracle price reaches at or below a specified price when going long or above or at a specified price when going short.

Limit order to enter a trade
Limit order to enter a trade

Limit Order Example

ETH-USD is currently trading at $1,300

Alice thinks there’s a chance that the price of ETH-USD gets to $800. Due to this possibility, Alice places a limit order to buy ETH-USD at $800. Once the oracle price drops to or below $800, the limit order triggers, and a market order is executed. This means Alice gets to buy ETH-USD for $800 instead of $1,300.

Several limit orders can be submitted per asset per contract at any time.

Limit order to take profit
Limit order to take profit

Limit orders can also be used to close out positions. After entering a long position at $800, Alice thinks the price of ETH-USD will reach $4,000. In anticipation of this Alice opens a limit order to sell or close the trade at $4,000. Once the oracle price goes above the $4,000 price point, the limit order will trigger a market order, locking in profits without having to monitor the market or manually close the trade.

What are Stop-Loss Orders?

Stop-loss orders offer traders the opportunity to protect themselves from large losses. When setting a stop-loss order, you set the price at which you are wanting to exit a position. If the market value of the asset falls below (when long) or above (when short) this price, the order will be executed, and the trader will be able to sell the asset at the set price.

In order to remain profitable, traders need to be able to manage risk. Stop losses help traders achieve this by automatically closing unprofitable positions and cutting losses before they deplete all available margin. This order type can also protect already achieved profit, by setting a stop-market order above an entry price.

Stop-Market orders can also be used to enter positions in the market above or below a price point, depending on the direction of the trade.

Cutting Losses: Stop-Market Example

Alice is long 1 ETH with an average entry price of $800. Alice anticipates that the market will remain on an upward trajectory as long as the $800 price holds.

To manage your risk and prevent the position from losing more than $200, Alice sets a stop loss at $600. Alice can rest easy knowing the maximum loss he will be exposed to is $200 regardless if he actively monitoring his trade or not.

Stop Market to exit a trade
Stop Market to exit a trade

Entering a Position: Stop-Market Example

Using the above example, Alice also thinks that if ETH-USD breaks above the $1,400 price market will continue to trend. Alice can now place a stop market order at $1,400 to ensure a market buy occurs once the price reaches above the $1,400 point.

Stop-Market orders are dual-purpose and can be used to exit profitable or unprofitable positions at a certain price point or open new positions once a price barrier has been breached.

Stop Market to enter a trade
Stop Market to enter a trade

What’s Next?

Cross-margin account contracts enable traders to take advantage of opportunities in the market by opening new order types stop-market and limit orders. This gives them the control they need while also limiting their exposure to potential losses. By matching the features of centralized exchanges, Kwenta is moving closer to its goal of providing a comparable trading experience with a DeFi twist. Moving forward Kwenta will focus on copy-trading the Kwenta token launch and integrating Synthetix V2 Perp contracts when released.

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To trade synthetic assets and futures, visit Kwenta.

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