What Is Liquidation in Crypto Trading (and How to Avoid It)
If you trade crypto with leverage, liquidation is the one word you need to understand before anything else. It's the moment the exchange steps in, closes your position for you, and takes the margin you put up. This guide explains what liquidation is, why it happens, and seven concrete ways to avoid it.
What does liquidation mean?
When you open a leveraged position, you put up a small amount of your own money — the margin — and borrow the rest from the exchange. If the price moves against you far enough that your losses would eat through that margin, the exchange liquidates the position: it force-closes your trade so it never has to cover your loss. You lose the margin allocated to that position.
Why does it happen?
Leverage cuts both ways. At 10× leverage you control a position 10 times larger than your margin, so a 10% move against you wipes out roughly 100% of that margin — and that's the liquidation point. The higher the leverage, the smaller the move needed to liquidate you. A 100× position can be liquidated by a 1% wobble.
Enter your entry, leverage and direction to get your exact liquidation price before you trade.
Open the liquidation calculator →Seven ways to avoid liquidation
- Use less leverage. The single biggest lever. 3–10× gives you room to breathe; 50–100× rarely survives normal volatility.
- Always set a stop-loss inside your liquidation price, so you exit on your terms with a smaller, controlled loss.
- Size positions by risk. Risk a fixed small % of your account per trade — see our position sizing guide.
- Keep a margin buffer. Don't use 100% of your balance; spare margin pushes liquidation further away.
- Prefer isolated over cross margin when learning, so one bad trade can't take your whole account.
- Mind funding and fees — they quietly erode margin on positions held a long time.
- Know your exit before you enter. Plan the stop and target first; calculate the liquidation price; only then open the trade.
Check it per exchange
Liquidation maths is the same everywhere, but maximum leverage differs. We have dedicated calculators for Bybit, Binance, OKX, KuCoin, Gate and Kraken.