- Liquidation in crypto futures usually happens because of risk-management mistakes, not because the trader “misread the chart.”
- High leverage pushes your liquidation price dangerously close, making even small moves enough to wipe out a position.
- Trading during major news events creates extreme volatility that can liquidate accounts in seconds.
- Oversized positions, no stop-loss, and emotional trading dramatically increase liquidation risk.
- The safest path for beginners is simple: use low leverage, set a stop-loss, avoid news events, and follow a clear plan.
Crypto futures trading can be exciting, but liquidation is the biggest threat every trader—especially beginners—needs to understand. Most liquidations don’t happen because traders misread the chart. They happen because of high leverage, weak planning, emotional decisions, or ignoring basic risk-management rules. In this guide, we’ll break things down in a simple, human way that makes liquidation easy to understand and even easier to avoid.
1. What Liquidation Really Means
Liquidation happens when your margin becomes too small to keep your position open. The exchange automatically closes your trade because your account can’t handle any more loss. This doesn’t always mean your idea was completely wrong; sometimes the market moves quickly and a high-leverage position gets wiped out instantly. In most cases, liquidation is a risk-management problem, not an analysis problem.
2. Why Traders Actually Get Liquidated (Real Reasons)
One of the biggest causes of liquidation is using high leverage. Leverage trading allows a trader to open both long and short positions that are much larger than their actual account balance. This gives you the ability to control more capital than you really have, which can increase your profits — but it also increases your losses at the exact same speed. The moment you go above 1× leverage, every move in the market becomes amplified, and the risk grows much faster than most beginners expect.
Even exchanges warn you about this; the alert literally tells you that high leverage increases liquidation risk and asks you to adjust your leverage before opening the trade. And honestly, if the exchange itself has to warn you about leverage, that alone should tell you how serious the risk really is — especially for beginners. The image below is what the platform tells you when you try to open high leverage position.
Many traders chase fast profits with 10x, 20x, or even 50x leverage, forgetting that even a tiny move against them is enough to wipe out their whole position. With high leverage, your liquidation price sits dangerously close to your entry, giving the market almost no room to breathe.
Another major reason is trading without a stop-loss. A lot of traders avoid using stop-losses out of fear that price might hit it and reverse. That fear usually leads to something worse—a full liquidation instead of a small, controlled loss.
Position size is another big factor. Many beginners open trades without calculating how big they should be. Safely, each position should be around 2%–3% of your capital. When your position is too large, liquidation becomes almost guaranteed.
Trading during major economic news is one of the most dangerous behaviors. Events like the U.S. Federal Reserve rate decision, Non-Farm Payrolls, or election results create extreme volatility where technical levels stop mattering. One candle can liquidate thousands of accounts instantly.
Adding to losing trades without a clear plan also leads straight to liquidation. Random averaging down is one of the fastest ways to blow up an account. Adding to a position should only happen with a predefined entry range and a stop-loss.
If you want more chart-based insights, check our Technical Analysis section, and if you’re still new to incentives, read our Crypto Bonuses Guide.
3. Common Beginner Habits That Make Liquidation Even Worse
The technical reasons matter, but beginner behavior is usually what finishes the account. Many traders enter the market based on emotion—fear, FOMO, boredom, or revenge trading. They trust luck instead of a plan, or hold losing positions because they “hope” the price will return. Others jump into volatile markets thinking they’ll catch a big move, even when the conditions are clearly dangerous.
A lot of beginners also ignore their liquidation price completely. They don’t check it before entering the trade, which creates overconfidence and a false sense of safety. Many traders also change their strategy depending on how they feel, which turns small mistakes into large losses.
4. How Liquidation Price Works (Super Simple Explanation)
Your liquidation price depends on your leverage, margin, entry price, and whether you’re using cross or isolated mode. Cross margin uses your entire balance to support the trade, meaning you could lose everything if liquidation hits. Isolated margin limits the loss to that specific trade.
Learn more from these references: Cross vs. Isolated Margin (Binance Academy) | Margin Modes (Bybit Learn).
Higher leverage brings the liquidation price extremely close and gives the market almost no breathing room. That’s why beginners should stay away from high leverage entirely.
5. How to avoid liquidation perpetual futures
The easiest and most reliable way to avoid liquidation is to use low leverage. Keeping leverage at 1x–3x gives your trades more room and reduces the chance of sudden liquidation. Always use stop-losses, even a small one. It’s much better to take a controlled loss than to lose the entire balance.
Trade smaller position sizes. Putting most of your balance in one trade is extremely risky. Avoid trading during major news releases, because volatility during these moments can liquidate you in seconds. And most importantly: follow a trading plan. If you enter trades randomly, you’ll exit emotionally—and emotional exits almost always end in liquidation.
6. My Personal Advice (From Real Experience)
From my own experience, one of the biggest mistakes I made early in my trading journey was trying to “fight liquidation” by adding more margin or increasing leverage. It never works. The second mistake was avoiding stop-losses and hoping the trade would reverse. If you look at my trading records below, you will see many wining trades, but the one with the highest loss is the one which I DID NOT set a stop loss to.
The truth is simple:
Use low leverage. Use stop-losses. And trade as if you don’t have leverage at all.
This mindset protects your account more than any strategy or indicator.
Final Thoughts
Avoiding liquidation isn’t complicated. When you use low leverage, respect your stop-loss, choose the right position size, avoid emotional trading, and stay away from high-volatility news events, your chances of long-term success increase immediately.
Trading isn’t about being right.
It’s about staying alive long enough to grow.
Explore more on: Education | Technical Analysis
FAQ — Frequently Asked Questions
1. What causes liquidation in crypto futures?
Liquidation usually happens because of high leverage, oversized positions, or trading without a stop-loss. Even small market movements can wipe out a position if the leverage is too high.
2. How can I avoid getting liquidated?
Use low leverage (1x–3x), set a stop-loss, trade smaller positions, and avoid big news events. These steps alone reduce liquidation risk by more than 80%.
3. Is cross margin more risky than isolated margin?
Yes.
Cross margin uses your entire account balance to keep a trade open.
Isolated margin limits the risk to just that one position, which is safer for beginners.
4. Does high leverage guarantee more profit?
No.
High leverage increases both profit and loss equally. Most traders lose money because leverage brings the liquidation price very close to the entry.
5. Can liquidation happen even with a good setup?
Yes.
During high volatility or news events, the market can move sharply and liquidate positions even if the analysis was correct.
6. Is liquidation possible in spot trading?
No.
Spot trading does not have leverage or margin requirements, so you cannot get liquidated when buying assets normally.
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