Why do beginners get liquidated when trading contracts?
Why do you always get liquidated as soon as you start trading contracts? Even though you are following the 'experts', why do you always lose your principal? In fact, 90% of liquidations happen because you don't understand these 5 key issues!
1. Leverage is too high, dying too fast
Core issue: Beginners always want to 'double their money in one go', often using 50x or 100x leverage with all their funds, resulting in liquidation as soon as the market fluctuates by 1%-2%.
💡 Correct approach: Beginners are advised to use 3-5x leverage, survive first before talking about making money!
2. No stop-loss, holding on until the end
Classic deaths:
- "Just wait a bit, it will definitely bounce back!" → Result: the price continues to fall deeper until liquidation.
- "I’ve already lost 50%, cutting losses will hurt too much!" → Ultimately loses 100%.
💡 Correct approach:
- Fixed stop-loss: Set a stop-loss immediately after opening a position (e.g. 3%-5%).
- Trailing stop-loss: Gradually move the stop-loss line up after making a profit to lock in gains.
3. Going all-in, everything to zero
Common mistake among beginners:
- "This opportunity is rare, All in!" → Result: the market reverses, leading to liquidation.
- "I’ll just play this round, if I make a profit, I won’t play anymore." → Usually ends up losing everything.
Position management formula:
`Maximum single position = Principal × 2% / Leverage multiplier`
(Example: $10,000 principal, 10x leverage → single position not exceeding $200)
💡 Correct approach:
- Each position should not exceed 5% of total funds.
- Diversify trades to avoid a single transaction determining your fate.
4. Emotional trading, chasing highs and cutting losses
Typical behaviors:
- FOMO (Fear of Missing Out): Seeing a surge, chasing it at a high price → Result: getting trapped.
- Panic selling: Fear during a crash, selling at low prices → Just sold and then it rebounds.
Statistics:
> 80% of liquidations occur during severe market volatility when beginners make mistakes due to emotional control issues.
💡 Correct approach:
- Create a trading plan and strictly follow it.
- Avoid staying up late watching the market to reduce emotional interference.
5. Not understanding exchange tricks, getting liquidated by 'spike traps'
Common techniques by exchanges:
- Spike: Instant drastic drop/rise in price, triggering a large number of stop-loss orders and then quickly recovering.
- Slippage: During extreme conditions, the actual execution price can differ greatly from the expected price.
💡 Correct approach:
- Choose mainstream exchanges.
- Avoid trading during extreme events (e.g., Federal Reserve meetings, major liquidations).
