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Risk Management & Liquidation

This guide explains the risks of leverage trading and how liquidation works on Dexetera.

Understanding Risk on Dexetera​

Your Money is at Risk​

Dexetera is leverage trading. You can lose your entire deposit quickly.

Never trade with money you need for:

  • Rent or mortgage
  • Food or essential expenses
  • Emergency funds
  • Money you promised to others

Only trade with:

  • Money you can afford to lose
  • "Play money" or speculative funds
  • Profits from previous trades
  • Money you'd be comfortable losing 100% of

Risk Levels​

Long Positions (Safest)​

Deposit: 100 USDC
Position: 100 USDC (1x)
Risk: You only lose what you put in.

Scenario:
- LONG at $50,000
- Price drops to $0
- Loss: 100 USDC maximum
- Liquidation: Effectively impossible (asset would need to go to $0)

Short Positions (Moderate Risk)​

Deposit: 100 USDC
Position: 100 USDC (1x)
Risk: Moderate - Liquidation if price doubles.

Scenario:
- SHORT at $50,000
- Liquidation at: $100,000 (100% up)
- You lose everything if price doubles

How Liquidation Works​

What is Liquidation?​

Liquidation = Your position is automatically closed when losses get too big.

Why?: To prevent you from owing money to the protocol. Since you cannot lose more than you deposited, the system closes your position before your equity turns negative.

Liquidation Price Calculation​

For SHORT positions, you are betting against the price. If the price goes up, you lose money.

Formula:

Liquidation Price = Entry Price × 2

Example:
- Entry: $50,000
- Liquidation: $50,000 × 2 = $100,000
- (100% price increase = liquidation)

For LONG positions, since there is no leverage, liquidation is practically impossible as it would require the asset price to drop to zero (or very close to it depending on fees).

Liquidation FAQs​

Q: Can I get liquidated with a LONG position? A: Practically no. You are trading with 1x leverage, which means you are fully collateralized. Unless the asset price drops to $0, you will strictly speaking not be liquidated, though your position value could drop significantly.

Q: Can I get liquidated with a SHORT position? A: Yes. If the price of the asset doubles from your entry price, your loss equals your deposit, and you will be liquidated.

Next Steps​