What is liquidation in crypto?
Liquidation is when an exchange automatically closes your leveraged position because your losses used up nearly all the margin you put in. You lose that margin.
Every leveraged position has a liquidation price. The higher the leverage, the closer that price is to where you opened.
An example
Why it matters to a beginner
High leverage turns a normal price swing into a total loss. Most beginners who try futures with high leverage get liquidated quickly.
What to watch for
- Your liquidation price before you open the trade.
- Leverage: 2x gives a lot more room than 20x.
- A stop-loss placed well before the liquidation price.
See it safely on CoinSparring
CoinSparring's futures screen shows the liquidation price before you open a position. Try different leverage levels with virtual money and see how close it gets.
Work it out for your own trade with the liquidation calculator.
Common questions
How do I avoid liquidation?
- Use low leverage, size small, and set a stop-loss that closes the trade before the liquidation price is reached.
Can I be liquidated on spot trading?
- No. Without leverage your coins can lose value, but they can't be force-closed.
Practice with fake money first
Start with 10,000 virtual USDT and live prices. Make the mistakes here, where they cost nothing.
CoinSparring is an educational simulator. All balances are virtual, nothing can be deposited or withdrawn, and nothing here is financial advice.