How Can a Trader Avoid Liquidation in a Highly Leveraged Position? ⎊ Path

How Can a Trader Avoid Liquidation in a Highly Leveraged Position?

A trader can avoid liquidation by actively managing their risk. The most direct methods are reducing leverage, adding more collateral to the margin account (to move the liquidation price further away), and setting a stop-loss order to automatically close the position before the liquidation price is reached.

Traders must also monitor the maintenance margin level and respond promptly to margin calls.

How Does a ‘Stop-Loss’ Order Help Manage the Risk of Liquidation?

How Does the ‘Liquidation Price’ Change with Varying Leverage Levels?

Explain the Concept of ‘Trailing Stop-Loss’ and Its Advantage over a Fixed Stop-Loss

How Does Order Book Liquidity Influence the Choice between Stop-Loss and Stop-Limit?

How Can a ‘Stop-Loss’ Order Be Used to Mitigate Liquidation Risk in Leveraged Trading?

What Is the Difference between a Stop-Loss Order and a Stop-Limit Order in Crypto Trading?

Explain the Role of “Stop-Loss Hunting” in Exacerbating a Flash Crash

What Is a ‘Liquidation Price’ and How Does It Relate to the Stop-Loss?

Glossar

Avoid Liquidation

Strategy ⎊ Avoiding liquidation requires proactive risk management strategies focused on maintaining a healthy margin ratio.

Maintenance Margin

Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.