Navigating the world of decentralized finance (DeFi) on Solana can be a powerful way to engage in trading activities. This guide provides a clear, step-by-step overview of how to use the GMX-Solana platform for swaps and leverage trading, ensuring you have the foundational knowledge to start your journey.
Getting Started with Your Wallet
Before you can begin trading, you need a digital wallet that supports the Solana network. A wallet is your gateway to interacting with decentralized applications (dApps) and managing your digital assets securely.
Popular wallet options include Brave, Phantom, and Solflare. These wallets allow you to store, send, and receive cryptocurrencies on the Solana blockchain. Once you have set up a wallet, you are ready to connect it to the GMX-Solana platform.
Connecting your wallet is straightforward. Simply press the "Connect Wallet" button located in the top right corner of the GMX-Solana interface. This action establishes a secure link between your wallet and the platform, enabling you to perform various transactions.
To start trading, you will need SOL, the native cryptocurrency of the Solana network, in your wallet. SOL is used to pay for transaction fees, also known as gas fees. You can acquire SOL by purchasing it directly on a Solana-supported exchange or by transferring it from other blockchain networks.
Understanding Swaps and Leverage Trading
GMX-Solana supports two primary trading functions: token swaps and leverage trading. Swaps allow you to instantly exchange one cryptocurrency for another at the current market rate.
To execute a swap, navigate to the "Trade" page and click on the "Swap" tab. This opens an interface where you can select the tokens you wish to exchange, view the exchange rate, and confirm the transaction. Swaps are a fundamental building block for many trading strategies.
Leverage trading, on the other hand, allows you to open positions larger than your initial collateral by borrowing funds. This can amplify both potential profits and losses. The platform offers both long and short positions, enabling you to speculate on price movements in either direction.
How to Open a Leveraged Position
Opening a leveraged position involves several key steps to ensure you understand your exposure and risks.
Step 1: Choosing Your Position Side
Your first decision is whether to open a long or short position. A long position profits if the token's price increases, while a short position profits if the price decreases. After selecting your side, you will specify the amount of capital you want to commit and the leverage multiplier you wish to use.
Step 2: Selecting a Trading Market
You must choose which token pair you want to trade. The available markets will list various cryptocurrencies against quotes like USD. Your selection here determines the asset you are speculating on.
Step 3: Picking a Liquidity Pool
For a given market, there may be multiple liquidity pools available, such as a single pool or a balanced pool. These pools differ in their composition and the type of collateral they accept. Your choice of pool can affect the trading fees and liquidity available for your position.
Step 4: Choosing Your Collateral Type
This is a critical decision. You can often choose the type of collateral that backs your position. For instance, in a SOL/USD market, you might collateralize your position with either SOL itself or a stablecoin like USDC.
The choice of collateral impacts your overall exposure and risk. Using a volatile asset like SOL as collateral for a long position increases your directional exposure to that asset. Conversely, using a stablecoin isolates your speculation to the leveraged position itself, which can be useful for traders who switch between long and short positions frequently. It is important to note that using a non-stablecoin as collateral means your liquidation price will fluctuate with the price of that collateral asset.
Step 5: Setting Your Leverage
The maximum leverage allowed for a pool is not fixed. It decreases as the total open interest in that pool increases. This mechanism protects the pool from potential market manipulation via high-leverage positions. The interface will display a warning if your selected leverage exceeds the current maximum. This rule applies only to opening or increasing positions; it does not affect positions that are already open.
To explore advanced leverage strategies and real-time pool data, you can view real-time tools that provide deeper market insights.
Managing Your Open Positions
Once a position is open, it will appear in your "Positions" list. Here, you can monitor key metrics like your current profit/loss, leverage, and, most importantly, your liquidation price.
You can manage your risk by adjusting your collateral. Clicking the "Edit" button on a position allows you to deposit additional collateral or withdraw excess collateral. Adding collateral lowers your leverage and improves your liquidation price, reducing the risk of being liquidated during a price swing.
How to Close a Position
You can close a position partially or in full by clicking the "Close" button. When you close a position, you realize any profits or losses proportional to the amount you are closing.
Profits from long positions are paid in the asset you were longing (e.g., SOL). Profits from short positions are typically paid in the stablecoin used to open the position. The interface allows you to customize which token you receive upon closing, though selecting a different token may incur a swap fee.
Utilizing Advanced Order Types
Beyond simple market orders, GMX-Solana offers advanced order types to help you manage your trades more precisely.
Limit Orders
A limit order allows you to set a specific price at which you want to open a position. The order will only execute if the market reaches your specified price. However, execution is not guaranteed. It can fail due to insufficient liquidity, the mark price not being hit precisely, or because the resulting position would exceed the pool's max leverage.
Take-Profit and Stop-Loss Orders
Take-profit (TP) and stop-loss (SL) orders are essential risk management tools. A TP order automatically closes your position to secure profits at a predetermined price level. An SL order closes your position to cap losses if the market moves against you.
These are trigger orders, meaning they become market orders once the trigger price is hit. As market orders, they are executed at the best available price, which may differ slightly from the trigger price. You can set these orders when opening a position or add them later via the "Set TP/SL" option in your position row.
It is important to note that if you manually close a position, any associated TP/SL orders remain active and must be canceled manually unless you have the Auto-Cancel feature enabled.
The Auto-Cancel Feature
To simplify order management, the Auto-Cancel feature is enabled by default for TP/SL orders. It automatically cancels these orders when their associated position is fully closed, whether by manual action, liquidation, or a triggered order. This prevents old orders from accidentally executing on new positions. There is currently a limit of 10 auto-cancel orders per position.
Understanding Liquidations and Market Safety
Liquidation is a critical concept in leverage trading. Your liquidation price is the point at which your losses nearly equal your collateral value. If the market price hits this level, your position is automatically closed to prevent further losses, and a liquidation fee of 0.2% of the position size is charged.
Your liquidation price is dynamic. It changes due to accruing funding fees and the fluctuating value of your collateral if it is a volatile asset. Actively monitoring this price is crucial when using high leverage.
You can improve your liquidation price at any time by depositing more collateral into your position using the "Edit" function.
Market Types and Auto-Deleveraging (ADL)
GMX-Solana features different market types to ensure stability. In a fully backed market, the total open interest is limited by the value of assets in the liquidity pool, guaranteeing that all profits can be paid.
In synthetic markets, the value of profits from long positions could theoretically exceed the pool's assets. To prevent insolvency, an Auto-Deleveraging (ADL) mechanism may activate. When pending profits surpass a safe threshold, the most profitable positions are partially or fully closed to ensure the market remains solvent for all traders.
Stablecoin Pricing Considerations
When trading with stablecoins, it's important to know that their price may not always be precisely $1. The platform uses oracle prices from providers like Chainlink. If a stablecoin depegs from its dollar peg, the oracle price will reflect this market spread, which will be used for pricing and calculations on the platform.
Frequently Asked Questions
What is the minimum amount needed to start trading on GMX-Solana?
There is no fixed minimum deposit set by the protocol itself. However, you need enough SOL to cover transaction (gas) fees for your trades. The amount required to open a position will depend on the chosen leverage and the minimum size allowed by the liquidity pool.
Can I change my leverage after opening a position?
You cannot directly change the leverage multiplier of an existing position. However, you can effectively adjust your leverage by depositing or withdrawing collateral from the position. Adding collateral lowers your leverage, while withdrawing collateral increases it.
What happens if my limit order is not executed?
A limit order may not execute if the market price never reaches your specified trigger price, if there is insufficient liquidity at that price, or if executing the order would violate the pool's current maximum leverage rules. You can cancel and revise the order if needed.
How are funding fees calculated?
Funding fees are periodic payments exchanged between long and short traders to balance the market. The rate is determined by the difference between the perpetual contract price and the spot price. The specific formula and payment intervals are set by the protocol for each market.
Is there a difference between market and limit orders when closing?
Yes. A market order closes your position immediately at the current market price. A limit order allows you to set a specific price at which you want to close, but execution is not guaranteed. For rapid execution, market orders are used, while limit orders provide more control over the exit price.
How can I reduce my risk of liquidation?
The most effective way to reduce liquidation risk is to use lower leverage and/or deposit additional collateral into your open positions. Regularly monitoring your positions and the market conditions is also essential for proactive risk management. For a deeper dive into managing leverage, you can explore more strategies available.