#GENIUSActPass

Liquidation in Margin Trading – The Trap for Beginners

When you use margin trading on Binance, you are essentially borrowing an amount from the platform to open a position larger than your balance. The problem is that any small movement against your position can kick you out of the game, and this is what we call "liquidation".

So what is liquidation?

It is the moment when the market reaches a point where your loss equals your actual capital, and Binance automatically closes the position so that it doesn't lose the money it lent you as margin.

An example to illustrate:

You entered a position with $100, and chose a leverage of ×20

This means you are trading as if you have $2,000

If the market drops by just 5% against your expectation, your position is wiped out and liquidated.

Whereas if you only used a leverage of ×2, the same drop would cause you a smaller loss, and you might be able to adjust the position before it gets wiped out, so take action before it's too late.