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What is the liquidation of a position?

Published: 19 июля 2024
1 min

What is the liquidation of a position? What is the liquidation of a position?

Hi friends, today we are going to talk about a topic that left a lot of traders without money last week. Read to the end, it will be interesting!

Imagine how your deposit is growing on the stock exchange thanks to a successfully bought coin. But one sharp movement of the chart, and your account is already 0. How can this be?

Liquidation is the forced closing of a position by an exchange when the price of an asset reaches a level at which your margin deposit no longer covers your losses.

How to avoid liquidation?

  1. You should not trade with 100x leverage, unless you are the Wolf of Wall Street. Stay within 5x until you feel confident.
  2. Set stop losses! Let this be your airbag for when the market decides to play tricks on you.
  3. Keep an eye on the news. The crypto market is very sensitive to news. Rumors of new bankruptcies or Donald Trump's tweets can turn things upside down.  
  4. Don't put all your eggs in one basket. Spread your capital across multiple assets to minimize risk.

Liquidating positions is a pain every trader has experienced. But if you are careful, follow simple rules and learn from mistakes, you can safely say: I control my risks.

We have our own history of liquidations and trading the markets. Watch an interview with the trader on our YouTube channel.

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