Liquidation Analysis Risks And Prevention In Crypto Leverage Trading

The definition and core of Get Liquidated

Getting Liquidated, also known as forced liquidation, occurs when an investor’s margin position suffers significant losses and the margin is insufficient, leading the exchange to automatically close the position to prevent the account from going into debt.

Case Analysis

For example, using 10x Margin Trading to invest $1000, controlling a cryptocurrency worth $10,000, when the price drops by 10%, the funds will be completely exhausted, and the exchange will trigger a forced Get Liquidated.

The main reasons for getting liquidated

• Excessive leverage amplifies the risk of losses.
• Market volatility has caused a rapid reduction in margin.
• Insufficient risk control and lack of stop-loss operations.
• Emotional trading leads to impulsive margin trading.

How to prevent getting liquidated

It is recommended to reduce the leverage ratio to 2 - 5 times, set reasonable stop-loss points, diversify positions, and enhance market learning and risk control awareness.

Response After Getting Liquidated

When liquidation events are inevitable, stay rational, avoid chasing losses, reassess your trading strategy, and actively learn from experience.

Summary

Getting liquidated is a danger warning in encryption margin trading. Understanding the risks and taking effective preventive measures is the key to successful investing.