To reduce the risk of liquidation and margin call, the following strategies can be implemented to avoid massive losses due to excessive leverage.

To reduce the risk of liquidation and margin call, the following strategies can be implemented.
1. Reasonably control the leverage ratio.
All leveraged traders should keep in mind: the higher the leverage ratio, the greater the risk of liquidation. For novice traders, it is strongly recommended to use no more than.
3 times leverage to avoid excessive risk amplification.
For example: If the account balance is 1,000 USDT, using 3 times leverage allows control of a position of 3,000 USDT, which carries less risk compared to 10 times leverage of 10,000 USDT. Earning less is acceptable as long as you preserve your capital.
2. Set stop-loss levels in advance. Stop-loss orders are an important risk control tool to avoid liquidation. Traders can set a stop-loss price when opening a position.
For example: If going long on BTC at 100,000 USDT, the stop-loss can be set at 98,000 USDT (losing 2%). If the market price drops to this point, the system will automatically close the position to limit losses.
3. Maintain sufficient margin. When market volatility increases, maintaining a higher margin ratio can effectively reduce the risk of liquidation. For example: If the exchange's maintenance margin rate is 0.5%, it is recommended to prepare at least 3 to 5 times the additional funds as a buffer. Additionally, when the price is close to the liquidation point (upon receiving a liquidation notification), timely add margin to ensure account funds are sufficient and reduce the risk of liquidation.
4. Observe the market liquidation heatmap. Through the liquidation heatmap, one can observe which price ranges have a large number of liquidated positions and predict potential areas of sharp price fluctuations. Investors can adjust their entry and exit plans based on this data to avoid entering high-risk areas. For example: If the heatmap shows significant liquidations between 100,000 and 98,000 USDT, it indicates that this range may become market support or resistance.
5. Diversify investments to reduce single-position risk. Do not put all funds into a single position; instead, spread them across different trading pairs or reduce the leverage of a single trade. This way, even if one trade experiences liquidation, part of the funds will remain unaffected.
For example: If you have 5,000 USDT, you could allocate 2,500 USDT to BTC and 2,500 USDT to ETH to reduce the impact of market fluctuations. It is important to note that the cryptocurrency market often sees simultaneous declines, so this strategy may not always be effective. However, a reasonable allocation of altcoins and mainstream coins can help reduce risk. It can be observed that during this significant drop, even top five mainstream coins like ETH and SOL have fallen over 30% from their peaks, which indicates that leverage exceeding 3 times can also lead to liquidation. This is also why we previously mentioned 'liquidations in bull markets' in articles about bullish price trends.
6. Pay attention to market trends and major events. Market news, macroeconomic data, and policy changes can all affect Bitcoin prices. For instance, during the FOMC meeting or the release of CPI data, the market often experiences significant volatility. Additionally, the approval or rejection of ETFs and changes in regulatory policies can also impact market confidence. Investors should closely monitor these key events and adjust their positions accordingly to reduce the liquidation risk caused by market fluctuations! While leveraged trading can amplify returns, it also magnifies risks. Although we encourage everyone to avoid a gambling mentality and focus on researching projects and holding spot assets, if you still wish to trade with leverage, understanding the mechanisms of liquidation and margin call is crucial. Through reasonable leverage control, stop-loss settings, maintaining sufficient margin, observing market heatmaps, and diversifying investment targets, the likelihood of liquidation can be effectively reduced. If you are a novice cryptocurrency trader or encountering contracts for the first time, although the leverage limits offered by exchanges may seem tempting, it is still advisable to start with low-leverage trading and learn to observe market trends and manage risks to avoid substantial losses due to excessive leverage.#币安Alpha上新 #加密市场回调 #BTC #ETH #合约爆仓