What is Liquidation?
Liquidation occurs when your margin balance falls below the maintenance margin requirement. When this happens, the exchange automatically closes your position to prevent further losses. Understanding liquidation is crucial for managing risk in leveraged trading.
How Liquidation Works
Step 1
Open Position
Step 2
Price Moves Against You
Step 3
Position Liquidated
Liquidation Calculator
Use this interactive calculator to understand how leverage affects your liquidation price and risk level.
Position Value
$10,000
Liquidation Price
$45500.00
Distance to Liquidation
9.0%
Unrealized P&L
+$0.00
Leverage Comparison
| Leverage | Liq. Distance | Risk | Recommended For |
|---|---|---|---|
| 2x - 5x | 20% - 50% | Low | Beginners |
| 10x - 20x | 5% - 10% | Medium | Experienced Traders |
| 50x - 100x | 1% - 2% | High | Scalpers Only |
| 100x+ | < 1% | Extreme | Not Recommended |
How to Avoid Liquidation
Use Lower Leverage
Lower leverage means more room for price movement before liquidation. Start with 2x-5x leverage until you gain experience.
Set Stop-Loss Orders
Always set stop-loss orders to automatically close your position before it reaches the liquidation price.
Add More Margin
Keep extra funds available to add margin if your position moves against you. This lowers your effective leverage.
Calculate Before Trading
Always calculate your liquidation price before entering a trade. Know your risk before you commit capital.
High Risk Warning
Leveraged trading is extremely risky. You can lose your entire investment in seconds. Never trade with money you cannot afford to lose. Most retail traders lose money when trading with leverage.
Best Exchanges for Futures Trading
These exchanges offer advanced liquidation protection features and competitive fees.
Key Takeaways
- Liquidation happens when your margin falls below the maintenance requirement
- Higher leverage means higher risk of liquidation - use it wisely
- Always set stop-loss orders to protect your positions
- Never risk more than you can afford to lose in leveraged trading
Ready to Trade Safely?
Start trading on trusted exchanges with proper risk management and exclusive fee discounts.