Learn how and why to protect your position with a Stop-Loss
This blog is based on the clip recorded by Jordan and Chris, going over Automations in Summer.fi. We highly recommend watching the entire video for the complete package!
The first days...
The introduction of the Automated Stop-Loss feature was met with an overwhelming response. On its very first day, hundreds of users activated this feature, signaling a strong demand for tools that help manage financial exposure in the crypto. Its success wasn't just a fleeting trend. To this day, it remains the most popular automation feature among users, underscoring its effectiveness and enduring relevance in token strategies.
Understanding Stop-Loss
For those unfamiliar with the term, a Stop-Loss is a predefined point at which a position is automatically closed to prevent further losses. This simple but yet powerful tool is crucial for users who wish to safeguard their positions against market volatility and adverse movements. Describing it might sound like a marketing spiel, but at its core, Stop-Loss Automation is about minimizing unnecessary financial risks.
Practical Benefits and User Experiences
Users often hesitate to open positions due to the fear of liquidation risks. The Stop-Loss addresses these concerns by allowing users to set a Loan-to-Value (LTV) ratio. This ratio is tied to a specific price point, which can be adjusted based on changes in the market or the user's position. Users can decide the maximum loss they are prepared to accept by setting a threshold, significantly reducing the liquidation risk.
How It Works
The process is straightforward yet effective. A user might set the stop loss at a fixed LTV ratio, say 70%. Regardless of subsequent price fluctuations or adjustments to the vault, the Stop-Loss maintains this ratio. This consistency ensures that the user's risk level is managed automatically, without the need for constant monitoring and manual adjustments.
Stop-Loss Tutorial
Conclusion
The Automated Stop-Loss feature represents a significant advancement in DeFi. It provides a practical, user-friendly solution for managing positions risks, enabling both seasoned users and novices to safeguard their tokens against unforeseen market downturns. Stop-Loss is available on all supported networks for Maker, Spark and Aave positions.
Getting in touch
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