Cryptocurrency is know for it's volatility nature which makes it the main subject to liquidation. Liquidation is a threat to crypto trading, it could make an investor to lose their entire capital with the blink of an eye.
Liquidation is the process where an investor is forced to exit their position in other to avoid the negatives fairness caused by an investors partial or total loss of their initial margin. This might occur when an investor can not meet up with the condition of their leverages or have insufficient fund to keep the trading running and continue the operation and the losses can lead the account to negative balance which will make it unable to maintain because of it unsustainability which can lead it to liquidation.
When this happens, the possibility of liquidation might depend on the leverage that an investor hold, if it is lower the balance might not be affected much and the risk of liquidation is lesser but in a situation where the leverage is high, and the crypto market decline means a great losses.
Liquidation can be partial or total liquidation and to avoid it, an investor need a smart trading strategy because there is a chance of losing money on a trade.
To avoid liquidation, an investor need to opt for a lower leverage to keep safe from liquidation even though they might loss money.
Monitor the margin ratio by making sure it doesn't reach it limitations, anytime it's close to it's limitation add more to it to keep the position alive and this will help you to trade for long without the risk of liquidation.
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