Here are 7 ways to avoid liquidation in trading, especially when dealing with leveraged positions:
1. Use Proper Risk Management
***Avoid overleveraging your account. Stick to a manageable position size (e.g., risk only 1-2% of your account per trade).
***Always calculate the risk-to-reward ratio before entering any trade.
2. Set Stop-Loss Orders
***Always use stop-loss orders to limit potential losses.
***Place the stop-loss at a level that invalidates your trade setup rather than at random levels.
3. Maintain Adequate Margin
***Keep a buffer in your account by maintaining a sufficient margin level.
***Avoid using all available capital as margin, which increases the risk of a margin call.
4. Diversify Your Trades
***Avoid putting all your capital into a single trade or market.
***Spread your risk across multiple assets to reduce exposure to one position.
5. Monitor Market Volatility
***Avoid trading during highly volatile events, such as news releases, unless you are confident in your strategy.
***Use tools like the Average True Range (ATR) to identify volatile conditions.
6. Leverage Properly
***Use low leverage, especially as a beginner. High leverage magnifies both profits and losses, increasing the chance of liquidation.
***For example, start with a leverage ratio of 1:5 or lower rather than 1:100.
7. Have a Clear Trading Plan
***Stick to a well-defined plan that includes entry, exit, and risk management strategies.
***Avoid emotional or impulsive trading decisions that deviate from your plan.