Liquidation is an involuntary event in which the value of a position drops sharply, resulting in a loss of funds, while liquidation is when a trader actively closes a position. Liquidation is caused by insufficient funds, while liquidation can occur for a variety of reasons, such as profit taking, stop loss, and position adjustment. To avoid liquidating their positions, traders should use leverage carefully, set stop-loss orders, diversify their portfolios, and actively manage risk.
A brief explanation of liquidation and liquidation
liquidation
liquidation means that the value of a trader’s position drops sharply, resulting in insufficient collateral to maintain his position, and ultimately all funds loss situation.
Closing
Closing is the process by which traders close their existing positions (buy or sell). This can be for various reasons such as taking profit, stopping loss or adjusting a position.
The essential difference between liquidation and liquidation
A key difference between liquidation and liquidation is that liquidation is an involuntary event, while liquidation is a voluntary action. Liquidation occurs when traders do not have enough funds to maintain their positions, while liquidation is proactively performed by traders for specific reasons.
Another difference is that liquidation usually results in the loss of all investors' funds, while liquidation allows investors to realize profits or losses. In addition, liquidation usually occurs when the market experiences severe fluctuations or adverse circumstances, while liquidation can be executed under any market conditions.
Strategies to avoid liquidation
To avoid liquidation, traders should take the following measures:
The above is the detailed content of Popular understanding of liquidation and liquidation. For more information, please follow other related articles on the PHP Chinese website!
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