🚨Reasons for liquidations happening and procedure for avoiding

🚀Why Liquidations Happen:

Insufficient Margin: Liquidations occur when a trader’s equity falls below the required margin level due to a price movement against their position. If the trader cannot add more funds, the broker automatically closes the position.

Market Volatility: Rapid price movements can cause significant losses, especially when using high leverage. A small adverse price change can lead to liquidation.

Poor Risk Management: Lack of risk management tools like stop-loss orders, or using excessive leverage, increases the chances of liquidation by exposing the account to larger losses.

Liquidity Issues: In low liquidity markets, slippage (when an order executes at a worse price than expected) can cause the account equity to fall below the margin requirement, triggering liquidation.

How to Avoid Liquidations:

Use Lower Leverage: Lower leverage provides more room for price fluctuations without triggering liquidation, reducing risk.

Set Stop-Loss Orders: Stop-losses automatically close a position if the price moves against you by a certain amount, limiting losses before they escalate.

Maintain Sufficient Margin: Regularly monitor margin levels and add funds when necessary to ensure your account stays above the maintenance margin.

Diversify Positions: Spread your risk across different assets to reduce the impact of a single losing position.

Use Take-Profit Orders: Set take-profit orders to lock in profits when your target is reached, reducing emotional trading decisions.

Regularly Review Positions: Stay updated on market conditions and adjust your positions or risk management strategies accordingly.

Trade During Liquid Hours: Trade during times of higher liquidity to reduce the risk of slippage.

Understand Market Conditions: Know the volatility and risks of the assets you’re trading to avoid unexpected liquidations.

By managing leverage, setting stop-losses, maintaining margin, and staying informed, traders can significantly reduce the likelihood of forced liquidations.