What is position liquidation and liquidation in the currency circle?

Liquidation in the currency circle refers to the closing of a position, which can be divided into buying and selling; liquidation refers to a position being closed due to insufficient margin. It usually occurs when prices fluctuate significantly, and traders will lose all margins. Measures to avoid liquidation include: 1. Setting stop-loss orders; 2. Managing risks and taking reasonable positions; 3. Monitoring the market and closing positions in a timely manner; 4. Using leverage with caution.

What is liquidation and position liquidation in the currency circle?

Liquidation

In the currency circle, position liquidation refers to closing a position, that is, a buying or selling position. There are two types of closing operations:

• Buy closing: Close a long position (buy an asset).
• Sell to close: Close a short position (sell the asset).

The purpose of closing a position is usually to make a profit or limit a loss.

Liquidation

Liquidation refers to a position being forcibly closed due to insufficient margin in margin trading. Liquidation typically occurs when market prices fluctuate significantly, resulting in traders being unable to maintain the margin requirements on their positions.

During the liquidation process, the exchange will automatically liquidate traders’ positions to recover their losses. Traders will lose all of their margin and may face additional losses, depending on the size of the position before the liquidation.

Avoid liquidation

To avoid liquidation, traders should take the following measures:

• Use stop-loss orders: Setting stop-loss orders can help traders automatically close their positions when losses reach a predetermined level, thus Limit losses.
• Manage Risk: Don’t over trade and always maintain a reasonable position size.
• Monitor the market: Pay close attention to market dynamics and be ready to close positions if necessary.
• Be careful when using leverage: Leveraged trading can magnify profits, but it also increases the risk of liquidation. Use leverage carefully and avoid over-leveraging.

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