Trading with Leverage¶
Multiple bots on one account
You can't run 2 bots on the same account with leverage. For leveraged / margin trading, freqtrade assumes it's the only user of the account, and all liquidation levels are calculated based on this assumption.
Trading with leverage is very risky
Do not trade with a leverage > 1 using a strategy that hasn't shown positive results in a live run using the spot market. Check the stoploss of your strategy. With a leverage of 2, a stoploss of 0.5 (50%) would be too low, and these trades would be liquidated before reaching that stoploss. We do not assume any responsibility for eventual losses that occur from using this software or this mode.
Please only use advanced trading modes when you know how freqtrade (and your strategy) works. Also, never risk more than what you can afford to lose.
If you already have an existing strategy, please read the strategy migration guide to migrate your strategy from a freqtrade v2 strategy, to strategy of version 3 which can short and trade futures.
Shorting¶
Shorting is not possible when trading with trading_mode set to spot. To short trade, trading_mode must be set to margin(currently unavailable) or futures, with margin_mode set to cross or isolated
For a strategy to short, the strategy class must set the class variable can_short = True
Please read strategy customization for instructions on how to set signals to enter and exit short trades.
Understand trading_mode¶
The possible values are: spot (default), margin(Currently unavailable) or futures.
Spot¶
Regular trading mode (low risk)
- Long trades only (No short trades).
- No leverage.
- No Liquidation.
- Profits gained/lost are equal to the change in value of the assets (minus trading fees).
Leverage trading modes¶
With leverage, a trader borrows capital from the exchange. The capital must be re-payed fully to the exchange (potentially with interest), and the trader keeps any profits, or pays any losses, from any trades made using the borrowed capital.
Because the capital must always be re-payed, exchanges will liquidate (forcefully sell the traders assets) a trade made using borrowed capital when the total value of assets in the leverage account drops to a certain point (a point where the total value of losses is less than the value of the collateral that the trader actually owns in the leverage account), in order to ensure that the trader has enough capital to pay the borrowed assets back to the exchange. The exchange will also charge a liquidation fee, adding to the traders losses.
For this reason, DO NOT TRADE WITH LEVERAGE IF YOU DON'T KNOW EXACTLY WHAT YOUR DOING. LEVERAGE TRADING IS HIGH RISK, AND CAN RESULT IN THE VALUE OF YOUR ASSETS DROPPING TO 0 VERY QUICKLY, WITH NO CHANCE OF INCREASING IN VALUE AGAIN.
Margin (currently unavailable)¶
Trading occurs on the spot market, but the exchange lends currency to you in an amount equal to the chosen leverage. You pay the amount lent to you back to the exchange with interest, and your profits/losses are multiplied by the leverage specified.
Futures¶
Perpetual swaps (also known as Perpetual Futures) are contracts traded at a price that is closely tied to the underlying asset they are based off of (ex.). You are not trading the actual asset but instead are trading a derivative contract. Perpetual swap contracts can last indefinitely, in contrast to futures or option contracts.
In addition to the gains/losses from the change in price of the futures contract, traders also exchange funding fees, which are gains/losses worth an amount that is derived from the difference in price between the futures contract and the underlying asset. The difference in price between a futures contract and the underlying asset varies between exchanges.
To trade in futures markets, you'll have to set trading_mode to "futures".
You will also have to pick a "margin mode" (explanation below).
"trading_mode": "futures",
"margin_mode": "isolated"
Pair namings¶
Freqtrade follows the ccxt naming conventions for futures.
A futures pair will therefore have the naming of base/quote:settle (e.g. ETH/USDT:USDT).
Margin mode¶
On top of trading_mode - you will also have to configure your margin_mode.
While freqtrade currently only supports one margin mode, this will change, and by configuring it now you're all set for future updates.
The possible values are: isolated, or cross.
Isolated margin mode¶
Each market(trading pair), keeps collateral in a separate account
"margin_mode": "isolated"
Cross margin mode¶
One account is used to share collateral between markets (trading pairs). Margin is taken from total account balance to avoid liquidation when needed.
"margin_mode": "cross"
Please read the exchange specific notes for exchanges that support this mode and how they differ.
Increased risk of liquidation
Cross margin mode increases the risk of full account liquidation, as all trades share the same collateral.
A loss on one trade can affect the liquidation price of other trades.
Also, cross-position influence may not be fully simulated in dry-run or backtesting mode.
Set leverage to use¶
Different strategies and risk profiles will require different levels of leverage. While you could configure one static leverage value - freqtrade offers you the flexibility to adjust this via strategy leverage callback - which allows you to use different leverages by pair, or based on some other factor benefitting your strategy result.
If not implemented, leverage defaults to 1x (no leverage).
Warning
Higher leverage also equals higher risk - be sure you fully understand the implications of using leverage!
Understand liquidation_buffer¶
Defaults to 0.05
A ratio specifying how large of a safety net to place between the liquidation price and the stoploss to prevent a position from reaching the liquidation price. This artificial liquidation price is calculated as:
freqtrade_liquidation_price = liquidation_price ± (abs(open_rate - liquidation_price) * liquidation_buffer)
±=+for long trades±=-for short trades
Possible values are any floats between 0.0 and 0.99
ex: If a trade is entered at a price of 10 coin/USDT, and the liquidation price of this trade is 8 coin/USDT, then with liquidation_buffer set to 0.05 the minimum stoploss for this trade would be \(8 + ((10 - 8) * 0.05) = 8 + 0.1 = 8.1\)
A liquidation_buffer of 0.0, or a low liquidation_buffer is likely to result in liquidations, and liquidation fees
Currently Freqtrade is able to calculate liquidation prices, but does not calculate liquidation fees. Setting your liquidation_buffer to 0.0, or using a low liquidation_buffer could result in your positions being liquidated. Freqtrade does not track liquidation fees, so liquidations will result in inaccurate profit/loss results for your bot. If you use a low liquidation_buffer, it is recommended to use stoploss_on_exchange if your exchange supports this.
Liquidation warnings¶
Defaults to 0.2
liquidation_warn_ratio sends a notification once an open position gets close to its liquidation buffer - giving you the chance to react before freqtrade force-closes the position.
Experimental - best effort only
Liquidation warnings are a new, experimental feature and are sent on a best effort basis. They rely on the liquidation price reported by the exchange (or freqtrade's estimate in dry-run), which is only refreshed periodically. A fast market move, a liquidation stop jumping between two refreshes - which is common in highly leveraged cross margin - or the bot being stopped can all result in a position being force-closed without a prior warning.
It is expressed as a fraction of the price move that would use up a position's margin - 100% / leverage, so a 10% move for a 10x position. With the default of 0.2 a 10x position is warned about once its liquidation stop is less than 2% away (0.2 * 10%), a 5x position once it is less than 4% away.
Measuring it this way keeps the setting meaningful regardless of leverage - a plain price distance would trigger at wildly different points for a 2x and a 20x position (and for high leverage, immediately on entry). A freshly opened position reads a little below 1.0, as the exchange's maintenance margin and liquidation_buffer take their share of the move right away - the more so the higher the leverage.
The reference is the liquidation stop described above, which already includes liquidation_buffer - not the exchange's raw liquidation price. Set the value to 0 to disable these notifications. The corresponding telegram notification can also be silenced or disabled via notification_settings (liquidation_warning).
To avoid a stream of messages while a position sits close to its stop, a warning for the same position is repeated at most once per day. It is repeated earlier if the remaining distance halves compared to the last warning, and the state is reset once the position recovers to a comfortable distance again. No warning is sent for positions with open, unfilled exit orders.
Warnings are not a substitute for a stoploss
A liquidation warning is only sent while the bot is running, and reaching it means your regular stoploss did not trigger first. It is a last resort notification, not a risk management tool.
Cross margin - Liquidation warning¶
A single, account wide message is sent - all positions share the same collateral, so a loss on one position moves the liquidation stop of every other position closer as well. The message names the position closest to its stop, along with how many positions are currently at risk. It is sent again when a different position becomes the closest one, or when the closest position halves its remaining distance. Each position is still exited individually once it reaches its own liquidation stop.
As the distance is measured from the current price, a stop being pulled closer by losses elsewhere on the account - other positions falling, funding fees, realized losses, a withdrawal, or positions on the same account that this bot does not manage - is picked up the same way as the position itself falling.
Adding collateral to the account moves the liquidation stop away from all positions at once. freqtrade refreshes cross liquidation prices at startup, on every order fill, and twice per hour - so it can take up to 30 minutes until the warning check picks up a changed stop, in either direction.
Isolated margin - Liquidation warning¶
Each position is warned about separately.
Be aware that an isolated position's collateral is fixed at the amount committed to it - adding funds to your account will not move its liquidation stop. Your options in this case are to reduce or close the position.
Unavailable funding rates¶
For futures data, exchanges commonly provide the futures candles, the marks, and the funding rates. However, it is common that whilst candles and marks might be available, the funding rates are not. This can affect backtesting timeranges, i.e. you may only be able to test recent timeranges and not earlier, experiencing the No data found. Terminating. error. To get around this, add the futures_funding_rate config option as listed in configuration.md, and it is recommended that you set this to 0, unless you know a given specific funding rate for your pair, exchange and timerange. Setting this to anything other than 0 can have drastic effects on your profit calculations within strategy, e.g. within the custom_exit, custom_stoploss, etc functions.
This will mean your backtests are inaccurate.
This will not overwrite funding rates that are available from the exchange, but bear in mind that setting a false funding rate will mean backtesting results will be inaccurate for historical timeranges where funding rates are not available.
Developer¶
Margin mode¶
For shorts, the currency which pays the interest fee for the borrowed currency is purchased at the same time of the closing trade (This means that the amount purchased in short closing trades is greater than the amount sold in short opening trades).
For longs, the currency which pays the interest fee for the borrowed will already be owned by the user and does not need to be purchased. The interest is subtracted from the close_value of the trade.
All Fees are included in current_profit calculations during the trade.
Futures mode¶
Funding fees are either added or subtracted from the total amount of a trade