#RiskAnalysis #IfYouAreNewToBinance #Squretalks

đŸ”„ What Causes Liquidations on Binance and Across Crypto


1. Using Leverage Without Proper Risk Controls

Leverage means borrowing funds to trade more than you actually own.

On Binance, you can trade with up to 125x leverage in futures.

If the price moves even 0.8% against you at 125x, your position is wiped out.

Many users don’t understand the risk and get wiped out quickly.

👉 Example:

You long 1 BTC at $40,000 with 100x leverage.

If BTC drops to $39,600, you’re liquidated.

2. Sudden Price Swings & Whales

Crypto is highly volatile, and large whales can trigger massive price moves.

These moves often hunt stop-losses or trigger mass liquidations (a “long squeeze” or “short squeeze”).

One big sell or buy can cascade into a liquidation chain.

3. Overcrowded Trades (Herd Mentality)

Everyone betting in the same direction (e.g., long Ethereum) makes the trade fragile.

When price moves against the crowd, forced liquidations snowball, pushing price even further.



4. Lack of Stop-Loss or Take-Profit Strategies

Many users don’t use stop-loss orders.

They keep hoping the market will reverse—and by the time it doesn’t, their margin is gone.

5. News Events & Macro Triggers

Surprise events (e.g., SEC decisions, interest rate hikes, exchange hacks, whale moves) cause price spikes/drops.

The market doesn't wait for you to react—bots and algorithms move faster.

6. Low Liquidity on Certain Pairs

Smaller altcoins often have thin order books.

A modest trade or sell-off can trigger massive slippage, leading to more liquidations than expected.

7. Funding Rate Arbitrage Gone Wrong

Some users short or long to collect funding fees.

If price moves aggressively, the funding fee income is nothing compared to the liquidation loss.

🚹 Types of Liquidations
TypeDescriptionIsolatedOnly the margin assigned to that position is at risk.CrossUses all account margin to maintain the position. If that’s exhausted—you’re liquidated.

✅ How to Avoid Getting Liquidated

Use low or no leverage unless you deeply understand risks.

Always set a stop-loss.

Monitor funding rates and liquidation levels.

Avoid trading during news events unless experienced.

Diversify and don't go all-in on one position.