Filtering in Crypto: What Is It and How Can You Avoid It?

Crypto traders can lose all their money within minutes, and the reason is often "liquidation." So what does that mean and how does it happen?

In the world of crypto, some traders rely on leverage to increase the size of their trades compared to their actual capital. If a trader has $100 and uses 10x leverage, the trade value becomes $1,000.

If the price moves in the right direction, profits multiply.
And if the market moves slightly against the trade, losses start to escalate quickly.

This is where "liquidation" comes in.

Liquidation means that the trading platform automatically closes the trade when losses are close to the amount the trader has put up as collateral.

A simple example:

Someone has $100 and opens a position with 20x leverage, meaning a $2,000 position.

If the market moves slightly against them, they could lose the entire $100, and the platform will close the position immediately to protect the borrowed funds.

The higher the leverage:
• The greater the potential profits
• The faster the losses as well

Therefore, many professional traders use:
Low leverage
Stop-loss orders
Small trade sizes relative to capital
Continuous market monitoring

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