In perpetual futures trading, liquidation occurs when your margin is no longer sufficient to maintain your position, causing the system to automatically close it. To lower your risk of forced liquidation, consider the following best practices:
Use Lower Leverage
Higher leverage means even small price movements can quickly deplete your margin. Recommendation for beginners: 1–5× leverage.
Maintain Adequate Available Margin
Keeping extra funds in your futures account helps prevent your risk level from rising too quickly. When your margin ratio increases, add margin promptly to avoid nearing the liquidation threshold.
Set Stop-Loss Orders
Placing a stop-loss ensures that your position closes automatically when the market moves against you, preventing losses from expanding to liquidation levels.
Avoid Using Your Entire Balance for One Position
Never allocate all your margin to a single trade. Diversify your position size and avoid going “all-in,” which significantly increases liquidation risk.
Avoid Trading During Extreme Volatility
Major news events, economic data releases, or sudden market movements can cause sharp price swings. Liquidation risk is significantly higher during these periods.
Watch the Mark Price (Not the Last Traded Price)
Liquidation is triggered based on the Mark Price, not the latest transaction price. Even if the last price moves sharply, your liquidation risk remains lower as long as the Mark Price is stable.
Avoid Adding to Losing Positions
Adding margin to a losing trade (“averaging down/up”) increases your exposure and can rapidly raise your liquidation risk.
Use Scaled Entries and Take-Profits
Entering and exiting positions in batches is a more stable approach than committing the full position at once, helping spread out risk.
