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How to Minimize the Risk of Liquidation
How to Minimize the Risk of Liquidation

There are a number of ways you can minimize the risk of liquidation in crypto trading.

Updated over a week ago

1. Monitor the Maintenance Margin

To avoid getting liquidated, you should closely monitor your Maintenance Margin and Total Net USD Value. Maintenance Margin is the minimum amount of margin balance required to keep your open positions. Your positions will be liquidated once Total Account Value <= Maintenance Margin. Ensure that you have enough margin balance in your futures account to avoid liquidation, especially during a price drop.

2. Use the stop-loss function

Using a stop-loss function can help you limit and control potential losses. A stop-loss order is a conditional order executed at a specified price after a given stop price has been reached. Once the stop price is reached, it will buy or sell at the market/limit price depending on your order parameters. A stop-loss order can be used to limit an investor's loss on a position that makes an unfavourable move. For instance, if you set a 20% stop loss from your entry price, the order will be triggered when the price drops by 20% from your entry price. By setting a stop-loss function, you can exit a losing position earlier and avoid getting liquidated.

3. Avoid accumulating more contracts in a losing position

Avoid accumulating more contracts in a losing position to minimize the risk of liquidation. Adding more contracts to a losing position will increase your liquidation price for the entire position.

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