BitShares Forum
Main => General Discussion => Topic started by: merivercap on June 23, 2015, 12:27:15 am
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Hey guys,
Just have an interesting case study of my trading experience on Poloniex last week. I traded on Poloniex's margin trading platform and was margin called on June 15th 17:15 when the prices went from .000029 BTC per BTS to .000014 BTC per BTS back to .000028 BTC per BTS in a ten minute span. (Down 50% in less than 10 minutes!) I didn't realize the liquidity was so low on Poloniex, but it's interesting to know what can happen. I lost a chunk of money.
I think someone or some bot just ran down the book on all the buy orders and got the price really low to trigger all the margin calls and bought back at low prices, but not sure of the exact mechanics. Is anyone on this forum running a bot there? Lol.
Does anyone have an alternate or better explanation of what happened? The bigger issue is trying to understand the trading mechanics of price 'manipulation' techniques to trigger margin calls. On low liquidity days it seems like a viable strategy and that's precisely why I do not like any kind of forced settlement. The price seems too easy to manipulate. Also when liquidity is very low it seems like walking the book on margin call settlement can cause cascading margin calls. I'm hoping liquidity will solve most of these problems, but interested to know everyone's thoughts.
Can someone explain how this compares with SmartCoins?
I've been too busy to analyze this and didn't notice I was margin called until a few days after it happened. Hopefully we can use this as a case study so we can all learn. Let me know if you guys have questions.
BTW are you devs running Monte Carlo simulations on varying trading patterns and liquidity? It would be interesting to stress test various trading scenarios to see what happens...
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Don't know how Poloniex is doing it .
From my experience in BTC futures market , people can't manipulate the price on a single platform , because they need to control the price on multiple platform at the same time in order to effect the price greatly . Also , the smaller the exchange , the smaller the weight would be in the calculating factor .
Although I'm not sure that's what happened . You shorted or longed BTS ?
If you longed , then your margin call may happened at whatever fluctuation lower than 100% (5% maybe if it was a 20X leverage) , then it was margin called and forced to sell the BTS at the market with low liquidity which may account for the 50% drop in price chart , which was after the margin call but not before ?
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Don't know how Poloniex is doing it .
From my experience in BTC futures market , people can't manipulate the price on a single platform , because they need to control the price on multiple platform at the same time in order to effect the price greatly . Also , the smaller the exchange , the smaller the weight would be in the calculating factor .
Although I'm not sure that's what happened . You shorted or longed BTS ?
If you longed , then your margin call may happened at whatever fluctuation lower than 100% (5% maybe if it was a 20X leverage) , then it was margin called and forced to sell the BTS at the market with low liquidity which may account for the 50% drop in price chart , which was after the margin call but not before ?
Thanks btswildpig. What BTC futures market are you referring to? The only other margin trading platform I've used was Bitfinex.
Yeah I was long. Poloniex allows up to 2.5x leverage and pricing is just using its exchange, not any external ones. Initial margin is 40% and maintenance margin is 20%. I had about 1.4x leverage. So I was down about 15% so with leverage I should have been down about 21% at the prices before the dip, but the prices would have had to drop to .0000165 for me to get a maintenance margin call and it dropped to .000014. Extremely unusual because if you look at the chart in all of June prices never dip below .000028 BTC per BTS and in 10 minutes it goes from .000029 BTC per BTS to .000014 BTC per BTS and then back to .000028 BTC per BTS. I thought it might be a software glitch, but more likely someone or some bot managing the prices down to trigger a margin call.
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Don't know how Poloniex is doing it .
From my experience in BTC futures market , people can't manipulate the price on a single platform , because they need to control the price on multiple platform at the same time in order to effect the price greatly . Also , the smaller the exchange , the smaller the weight would be in the calculating factor .
Although I'm not sure that's what happened . You shorted or longed BTS ?
If you longed , then your margin call may happened at whatever fluctuation lower than 100% (5% maybe if it was a 20X leverage) , then it was margin called and forced to sell the BTS at the market with low liquidity which may account for the 50% drop in price chart , which was after the margin call but not before ?
Thanks btswildpig. What BTC futures market are you referring to? The only other margin trading platform I've used was Bitfinex.
Yeah I was long. Poloniex allows up to 2.5x leverage and pricing is just using its exchange, not any external ones. Initial margin is 40% and maintenance margin is 20%. I had about 1.4x leverage. So I was down about 15% so with leverage I should have been down about 21% at the prices before the dip, but the prices would have had to drop to .0000165 for me to get a maintenance margin call and it dropped to .000014. Extremely unusual because if you look at the chart in all of June prices never dip below .000028 BTC per BTS and in 10 minutes it goes from .000029 BTC per BTS to .000014 BTC per BTS and then back to .000028 BTC per BTS. I thought it might be a software glitch, but more likely someone or some bot managing the prices down to trigger a margin call.
2.5x leverage , need more than 40% fluctuation to cause a margin call , so guess you really were margin called because of the 50% glitch drop .
I used OKcoin , the price index were calculated from multiple source .
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Hey guys,
Just have an interesting case study of my trading experience on Poloniex last week. I traded on Poloniex's margin trading platform and was margin called on June 15th 17:15 when the prices went from .000029 BTC per BTS to .000014 BTC per BTS back to .000028 BTC per BTS in a ten minute span. (Down 50% in less than 10 minutes!) I didn't realize the liquidity was so low on Poloniex, but it's interesting to know what can happen. I lost a chunk of money.
I think someone or some bot just ran down the book on all the buy orders and got the price really low to trigger all the margin calls and bought back at low prices, but not sure of the exact mechanics. Is anyone on this forum running a bot there? Lol.
Yes thats exactly what happened, except that they probably didnt need to use a bot, they could just do it with a big market order.
Can someone explain how this compares with SmartCoins?
They wont insta-liquidate you on a price spike like that, if the price goes back up quickly, because the price feeds wont react that fast. Also, the feeds will take into account more than one exchange, so someone couldnt just do it on one low volume exchange to force margin calls.
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2.5x leverage , need more than 40% fluctuation to cause a margin call , so guess you really were margin called because of the 50% glitch drop .
I used OKcoin , the price index were calculated from multiple source .
I see. Interesting that OkCoin uses multiple sources.
Yes thats exactly what happened, except that they probably didnt need to use a bot, they could just do it with a big market order.
Can someone explain how this compares with SmartCoins?
They wont insta-liquidate you on a price spike like that, if the price goes back up quickly, because the price feeds wont react that fast. Also, the feeds will take into account more than one exchange, so someone couldnt just do it on one low volume exchange to force margin calls.
Yeah that's good to hear. Yeah I was pretty much insta-liquidated. How often are the price feeds updated? I'd like to try my hand at helping to design a Privatized BitAsset/SmartCoin and want to learn as much as possible.
You wanted long leverage without shorting BitUSD or BitBTC? You are just lucky that Poloniex did not get hacked while your coins were still in it. Poloniex sold the shares that dropped the price to trigger your margin call. Who else knew that you and several others were long on margin?
Yeah was going to wait to use the new 2.0 system after the hard fork. Wanted to experiment with other platforms too. Didn't think I was taking too much risk or leverage, but that was my mistake. I'm not sure if somehow margin data can be abstracted, but my primary suspicion is Poloniex anyways.
I assume people can figure out margin positions or somehow abstract it out from SmartCoin trading or is it somehow explicit somewhere? It would interesting, because margin/collateral data would be extra information people may use alongside orderbook data to analyze markets.