💥✅𝐇𝐨𝐰 𝐭𝐨 𝐒𝐞𝐭 𝐚 𝐙𝐞𝐫𝐨 𝐋𝐢𝐪𝐮𝐢𝐝𝐚𝐭𝐢𝐨𝐧 𝐏𝐫𝐢𝐜𝐞: 𝐀 𝐏𝐫𝐨𝐟𝐞𝐬𝐬𝐢𝐨𝐧𝐚𝐥 𝐎𝐯𝐞𝐫𝐯𝐢𝐞𝐰❗

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Setting a zero liquidation price—effectively eliminating the risk of forced liquidation—is a strategic approach used in leveraged trading and decentralized finance (DeFi) to maintain full control over positions, even during market volatility. While achieving a literal "zero" liquidation price is not always practical, traders can minimize the risk through careful planning and specific strategies.

Key Strategies to Minimize Liquidation Risk

1. Use Low or No Leverage:

Avoid high leverage as it significantly increases the chance of liquidation. A 1x leverage position essentially behaves like a spot position with no liquidation threshold.

2. Over-Collateralize Positions:

By depositing more collateral than required, you create a larger buffer against price fluctuations. For instance, using a 300% collateralization ratio instead of the standard 150% on platforms like Aave or MakerDAO provides additional security.

3. Utilize Stablecoins as Collateral:

Stablecoins reduce volatility exposure. By using assets like USDC or DAI, you limit price swings in your collateral, helping to maintain loan health.

4. Actively Monitor and Adjust Collateral:

Frequent review of your collateral levels and market conditions allows you to add more funds if needed, preventing liquidation before it becomes a threat.

5. Choose the Right Platform:

Use platforms that offer flexible liquidation models or self-repaying loans (e.g., Alchemix), where the risk of liquidation is inherently reduced by protocol design.

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