ALS
ALS: The Anti-Liquidation System is a risk management tool designed to prevent potential liquidations when trading in the futures market.
Last updated
ALS: The Anti-Liquidation System is a risk management tool designed to prevent potential liquidations when trading in the futures market.
Last updated
Principle of ALS Operation
The ALS (Anti Liquidation System) functions through the automatic management of hedging positions.
Key Features of ALS:
Setting up a hedge for the main position (with the option to split the hedge by levels and volumes).
Placing stop orders at breakeven for hedging positions.
Simultaneous closing of the main and hedging positions upon reaching a specified total ROI.
Quick management of settings through a web panel.
The primary metric used is the ROI of the position.
To operate ALS, it is necessary to switch trading to cross-margin mode. In isolated margin mode, the application of these hedging methods is not possible!
General Workflow of ALS: When the price moves in the opposite direction of the main position (i.e., into the negative), a hedge is opened at specified levels for a certain volume. Hedge orders are executed at market price. The process occurs in real-time, and the order volume is calculated as a percentage of the main position’s volume.
For example, if the main position is long...
Hedge opening levels and volumes are set in the "Hedge thresholds" settings.
To safely close the hedge in case of a price reversal, a mechanism for placing stop orders at breakeven is used.
How Stop Orders Are Placed:
The price moves away from the hedge level by the distance specified in “Min ROI for hedge stop” (expressed as a percentage of ROI).
A signal is triggered to place a stop order at the “Stop Loss Break Even Hedge” level (expressed as a percentage of price movement).
"Min ROI for hedge stop" is set as a percentage of ROI, while "Stop Loss Break Even Hedge" is set as a percentage of price movement. To convert "Stop Loss Break Even Hedge" to an ROI percentage, you must multiply it by the leverage.
"Stop Loss Break Even Hedge" is calculated so that the placed STOP-MARKET order (which is executed at market price) covers the commission for both opening and closing the hedge. You may set it higher to generate additional profit.
"Min ROI for hedge stop" should be chosen so that the price is far enough from the stop level to avoid immediate closure upon setting the stop order. However, it's crucial to maintain a balance: the closer the stop, the higher the risk of immediate closure and losing the hedge; the farther the stop, the higher the risk of catching the "upper hedge."
An additional parameter, "Stop Market Size K," in the settings allows increasing the size of the stop order relative to the hedge size. This enables closing part of the upper hedge with stop orders from adjacent hedges.
It is possible to set only one hedge level. The recommended limit for the number of hedge levels is no more than 10, as exchanges may have their own restrictions on stop-market orders.
To prevent the hedge from reopening immediately after closing by the stop order, a "safe zone" mechanism is implemented. This zone is defined as an area above and below the STOP-ORDER where opening a hedge is prohibited.
The Safe Zone is configured with the "Safe Zone" setting. Note that it is specified as a percentage of price movement. To convert it to ROI terms, you need to multiply it by the leverage.
The Safe Zone is established immediately after a stop order is placed. However, its size is calculated in real-time based on the settings.
As a result, all zones may be opened:
The Safe Zone closes when the price exits it in the direction of the main position.
In this case, it might look like this:
By this point, hedge-3 will already have been closed by the stop order.
At the moment of exiting the Safe Zone, the price is no longer within the range of Hedge-3, so the hedge will not reopen. The Safe Zone itself is then removed.
However, if the price moves towards the hedge without exiting the Safe Zone, reopening is only possible outside the zone. This can result in a shift of the hedge entry point.
If you set a narrow Safe Zone, the risk of frequent hedge reopenings increases. If the Safe Zone is too wide, the risk of a significant shift in the hedge entry point rises. It's important to choose the Safe Zone size according to individual strategies.
The Safe Zone is also removed if both positions are closed simultaneously or if the pair is added to the exceptions list.
Additional Notes:
When the Initial Stop Loss Break Even Hedge parameter is enabled, the conditional trailing stop order functionality is activated. Upon opening a hedge, a stop order is immediately placed for that hedge at the value specified in this parameter (in the negative). Once the Min ROI for Hedge Stop is reached, the stop order will be repositioned to the Stop Loss Break Even Hedge value.
ALS can close both positions (the main and the hedge) at market price if the specified cumulative (paired) ROI is reached.
