Crypto Liquidation: What It Is and How to Avoid It!

Krutika Adani

What Is Crypto Liquidation?

  • Crypto liquidation happens when a trader's position is automatically closed due to insufficient margin. This typically occurs in leveraged trading when market movements go against the trade.

Why Does Liquidation Happen?

  • High leverage – Small price drops can wipe out positions

  • Market volatility – Sudden swings trigger stop-loss orders

  • Insufficient margin – Not enough funds to cover losses

How to Avoid Getting Liquidated?

  • Use Stop-Loss Orders – Automatically exit before big losses

  • Lower Leverage – Avoid extreme risk on volatile assets

  • Maintain a Healthy Margin – Keep extra funds in your account

  • Diversify Your Portfolio – Don’t put all your funds in one trade

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