What reasons will cause the currency circle delivery contract to liquidate?

Cryptocurrency delivery contract liquidations are mainly caused by excessive leverage, chasing ups and downs, improper risk management, large market fluctuations, systemic risks, lack of trading experience and emotional trading.

Causes of liquidation of delivery contracts in the currency circle

Liquidation of delivery contracts means that when trading with delivery contracts, the net value of the account is low Due to the maintenance of margin, the contract was forced to be liquidated. The following are the main reasons that lead to the liquidation of currency circle delivery contracts:

1. Excessive leverage

Leverage refers to the method of borrowing funds for transactions. The higher the leverage, the more capital is available for trading, but the risk also increases. If the market fluctuates greatly, excessive leverage may cause the net value of the account to drop rapidly until the position is liquidated.

2. Chasing the rise and killing the fall

Chasing the rise when the market sentiment is high or killing the fall when the market sentiment is low are common triggers for liquidation. This behavior can easily lead traders to panic and make irrational decisions.

3. Improper risk management

Risk management refers to taking measures to limit trading risks. Common risk management methods include stop loss, adding to positions, and reducing positions. If a trader does not have a proper risk management strategy in place, the risk of liquidation increases significantly.

4. Large market fluctuations

The currency market is highly volatile, even for experienced traders, it is difficult to predict. If the market suddenly fluctuates significantly, the net value of the account will rise or fall rapidly, leading to liquidation.

5. Systemic risk

Systematic risk refers to events or factors that affect the entire market. For example, a cryptocurrency ban, an exchange hack, or an economic recession could cause a market drop, triggering a liquidation.

6. Lack of trading experience

Traders who lack trading experience are more likely to make mistakes, leading to liquidation. They may lack the understanding of market dynamics and risk management to make informed decisions.

7. Emotional trading

Emotional trading refers to the behavior of trading affected by emotions. Emotions such as fear, greed, and hope can interfere with rational judgment and lead traders to make inappropriate decisions, thereby increasing the risk of liquidation.

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