Crypto leverage trading can be exciting. It can also be risky. One wrong move, and you can lose everything.
This guide will teach you how to avoid liquidation. Follow these tips to trade smarter and safer.
What Is Liquidation in Crypto Trading?
Liquidation happens when your trade loses too much value. The exchange closes your position to protect itself. You lose your money.
High leverage increases liquidation risk. A small price drop can wipe out your funds.
Why Do Traders Get Liquidated?
Most liquidations happen because of:
Too much leverage – Higher leverage means higher risk.
No stop-loss – Without a stop-loss, losses can spiral.
Poor risk management – Betting too much on one trade.
Volatility – Crypto prices move fast. A sudden drop can liquidate you.
Now, let’s dive into the best ways to avoid liquidation.
1. Use Lower Leverage
Leverage lets you trade with borrowed money. But higher leverage means higher risk.
5x leverage: A 20% drop liquidates you.
10x leverage: A 10% drop liquidates you.
100x leverage: A 1% drop liquidates you.
Tip: Stick to 5x-10x leverage for safer trading. If you're new, start with 2x-3x.
Want to test your skills? Try our Trading Challenges.
2. Always Set a Stop-Loss
A stop-loss closes your trade at a set price. It limits your losses.
How to set a smart stop-loss:
Place it below key support levels.
Adjust it based on volatility.
Never trade without one.
Learn more in our MetaTrader Tutorials.
3. Manage Your Risk Properly
Never risk too much on one trade.
The 1-2% Rule:
Only risk 1-2% of your account per trade.
If you have $1,000, risk $10-$20 per trade.
This keeps you safe from big losses.
For more risk management tips, check our Trading eBooks.
4. Avoid Over-Trading
Too many trades = higher chance of mistakes.
Signs of over-trading:
Chasing losses.
Trading without a plan.
Ignoring market conditions.
Stick to your strategy.
Join our Trading Community on Discord for support.
5. Monitor Market Conditions
Crypto is volatile. News, regulations, and whale moves can crash prices.
Tools to stay updated:
6. Use Isolated Margin Mode
Exchanges offer two margin modes:
Cross Margin – Uses all your funds (riskier).
Isolated Margin – Limits risk to one trade (safer).
Always use Isolated Margin to protect your capital.
7. Keep Extra Funds (Margin) in Your Account
If your trade goes against you, extra margin can save you.
Example:
You open a trade with $100.
Keep an extra $50 as backup.
This reduces liquidation risk.
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8. Avoid Trading During High Volatility
Big news events cause huge price swings.
When to pause trading:
Major economic announcements.
Exchange hacks or regulations.
Bitcoin halving events.
Check our Daily Technical Analysis for insights.
9. Learn Technical Analysis
Understanding charts helps predict price moves.
Key concepts:
Support & resistance.
Moving averages.
RSI & MACD indicators.
Start with our Trading Video Academy.
10. Practice with a Demo Account
Before risking real money, practice.
Benefits of demo trading:
No real losses.
Test strategies safely.
Learn platform features.
Ready for a challenge? Join a Challenge Now.
11. Don’t Trade Against the Trend
“The trend is your friend.”
How to spot a trend:
Higher highs & higher lows = Uptrend.
Lower highs & lower lows = Downtrend.
Fighting the trend increases liquidation risk.
12. Use Take-Profit Orders
Greed can turn wins into losses.
A take-profit locks in profits at a set price.
Example:
Buy BTC at $30,000.
Set take-profit at $32,000.
This prevents holding too long.
13. Avoid Emotional Trading
Fear and greed lead to bad decisions.
How to stay calm:
Stick to your trading plan.
Don’t revenge trade after a loss.
Take breaks.
For mental strategies, read our Trading Glossary.
14. Diversify Your Trades
Don’t put all your money in one coin.
Example:
Trade BTC, ETH, and SOL.
If one drops, others may balance losses.
15. Keep Learning
Markets change. Keep improving.
Resources to help you:
Final Thoughts
Liquidation is avoidable. Follow these rules:
✅ Use low leverage.
✅ Always set stop-loss.
✅ Manage risk wisely.
✅ Stay updated with market news.
✅ Keep learning.
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Need help? Check our Evaluation Process.
Happy trading! 🚀
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