I see that many new traders using leverage still don't fully understand what liquidation is, so today I want to share some experience.

Liquidation is an automatic mechanism that closes your position when your account value drops to a certain level — called the liquidation price. When trading with leverage, you borrow money to open a larger position, which can multiply profits but also significantly increase risks. The exchange will automatically sell all your positions if your margin is insufficient, to prevent negative account balances.

The important thing is to understand what liquidation is and how it affects you. When you open a leveraged position, the exchange will calculate a price level at which, if the market hits it, they will forcefully close your position. This process is designed to protect both you and the exchange from uncontrollable losses.

In reality, when liquidation occurs, your assets will be sold to settle the debt. If your position is too large or the market moves strongly, you could lose your entire initial margin, and even incur additional losses.

Therefore, anyone who wants to trade with leverage must:

First, always monitor your liquidation price. If you don't understand what liquidation is and how it’s calculated, you can be caught off guard.

Second, set a reasonable stop loss. Don’t wait until the exchange automatically closes your position; proactively protect your capital.

Third, manage risk carefully. Avoid opening positions that are too large or using excessively high leverage.

I recommend beginners start with low leverage, around 2-3x, until they truly understand what liquidation is and how to manage risk effectively. The crypto market is volatile and fast-moving, so knowledge about liquidation is not just theoretical but a vital skill to protect your assets.