Liquidation vs. Stop Loss Which Should You Choose?

After trading for over five years, one of the most critical lessons I’ve learned is the importance of protecting your capital. In the volatil world of crypto trading, understanding the difference between liquidation and stop loss can be the difference between surviving and thriving. So, let me share what I’ve learned from my experience.

1. Liquidation 😶‍🌫️

Liquidation is what happens when your position drops so much that your margin can no longer cover the losses. The exchange automatically closes your trade, effectively telling you, “Game over.” In my early trading days, I learned the hard way that liquidation isn’t just painful—it can wipe out your entire margin. It’s the last thing any trader wants to experience.

DONT USE HIGHER LEVERAGE ✅

DONT USE > 5% MARGIN PER TRADE ✅

DONT OPEN MORE THAN 3 TRADES ✅

DON'T FOLLOW SQUARE SIGNALS ✅

“When you liquidate, you’re not just losing a capital, you’re losing your opportunity to trade again." -RkY Sri Lanka

2. Stop Loss 😌

A stop loss, on the other hand, is a tool that has saved me countless times. It’s a predetermined price level where you decide to exit the trade to minimize losses. Instead of letting the market dictate when you’re done, you’re in control. You decide exactly how much you’re willing to lose before pulling the plug. Trust me, this small but powerful tool can be the difference between a bad day and a disaster.

“Trading without SL is like driving without brakes you’re bound to crash.” -RkY

👉 Using a stop loss gives you control over your trade. You set your risk tolerance and stick to it. This kind of control builds confidence in your strategy and keeps you from making panic-driven decisions. Over the years, I’ve seen how this approach can turn a losing streak into a learning experience rather than a financial crisis.

👉 One of the biggest lessons I’ve learned is that capital preservation is key. With a stop loss, you’re protecting your capital from liquidation.