It’s called liquidation. If your margin runs out, the exchange forcefully closes your trade. Why does this happen?
Futures trading uses leverage. If the market moves against you and your margin is too low, your position is liquidated. What triggers liquidation?
1. High leverage – Small price moves can erase your margin. 2. Poor risk management – No stop-loss, overtrading, and ignoring volatility. But How do you spot early signs of liquidation risk?
– Margin ratio too high? You're close to liquidation. – Unrealised losses piling up? Reduce risk. – Market volatility rising? Adjust leverage.
– Use lower leverage – 3x-5x instead of 20x. – Set stop-loss wisely – Don’t leave trades unprotected. – Manage margin actively – Keep buffer funds ready
– 100x leverage? A 1% move can liquidate you. – 10x leverage? You get more breathing room. – Smart traders use 2x-5x leverage for controlled risk.
– Aim for 1:2 or 1:3 risk-to-reward. – If risking ₹1,000, your target should be ₹2,000-₹3,000. – Never risk more than 2% of your total capital per trade.
– Use trailing stop-loss to lock in profits. – Avoid revenge trading after liquidation. – Stay updated on funding rates—high rates signal riskier conditions.
Use low to moderate leverage ✔ Set stop-loss and take-profit ✔ Monitor margin ratio ✔ Stick to risk-to-reward rules ✔ Keep emotions out of trading
Use low to moderate leverage ✔ Set stop-loss and take-profit ✔ Monitor margin ratio ✔ Stick to risk-to-reward rules ✔ Keep emotions out of trading
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