Understanding liquidation price

If there's anything a futures trader looks out for, it is the liquidation price when entering a particular position. This then makes the liquidation price a thing of great concern in Futures trading. Failure to pay attention to your liquidation price could always lead to fatal losses. This is what makes futures trading very risky.

Incase you are asking what liquidation price is, follow me as I do a little explaination. In futures trading whether longing or shorting, there is an entry price and there is a liquidation price. The entry price is the price with which you enter the market (open position). Whereas, the liquidation price is that price which when reached, you will lose your margin plus the resulting percentage loss in USDT.

For instance, you choose to trade Hive on futures (binance is yet to list hive for futures trading). And let's say you are longing hive from an entry price of $0.17. You are then given a liquidation price to be at $0.07, depending on your wallet balance and other factors.

It then means that if the price of Hive hits $0.07, you will lose all the USDT you used in entering the trade plus the calculated loss. Meanwhile, to long simply means that you are predicting the price movement to be upward. While shorting means predicting the price of a particular coin/ token to dip.

It is then the duty of the trader to learn to avoid being liquidated. One of those ways is to always take profits as the come and avoid being greedy. Don't wait for excessive gains. You could as well calculate the liquidation price using the calculator before entering a position.

Posted Using LeoFinance