What is the liquidation price?
When preparing to trade on cryptocurrencies using leverage, we need to consider several different factors that may affect the effectiveness of our investment.
Today we would like to focus on the 'Liquidation price' term, which can effectively help you understand the issue of closing a position.
When your current portfolio balance drops below the required margin for holding this position, the risk management system closes the position. In this situation, the liquidation price is the price at which the maintenance margin cannot effectively cover our position. Any deposit we still hold will be lost.
All changes to deposit, withdrawal, trading and transaction requirements impact the liquidation price. For example, the accruing interest of 0.01% within 24 hours will affect your balance and change the liquidation price.
How to protect yourself from the liquidation of a position?
As a general rule, the best way to protect your funds from liquidation is to set a stop loss level on your position. It will help you exit your investment before the market reaches liquidation value. In addition, you can always lower the value of the leverage you use. The last way is to increase the value of your portfolio or lower the position's value. It will help to avoid liquidation and wastage of funds.
All these solutions can be used without any problems on the Geco.one cryptocurrency derivatives exchange - you can easily set stop loss and take profit levels and edit them in an open position. An interesting solution for beginners is trading without using leverage. Easy and customisable UI helps you become familiar with this type of trading.
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