What does liquidation mean? How to avoid breach of contract in a contract

Liquidation refers to the behavior of traders being forced to liquidate their positions due to insufficient margin due to market price changes. In order to avoid contract liquidation and default, traders can take the following measures: 1. Reasonably control leverage; 2. Set stop loss orders; 3. Cover positions; 4. Choose appropriate trading varieties; 5. Diversify investments; 6. Avoid excessive trading. ; 7. Improve trading skills; 8. Choose a reputable trading platform; 9. Pay attention to market dynamics at any time.

What is liquidation?

Liquidation refers to the act of forcibly liquidating a trader's position due to unfavorable changes in market prices in financial transactions, resulting in a trader's margin account balance being insufficient to maintain the current position.

How to avoid default when contract liquidation occurs

In order to avoid contract liquidation and default, traders can take the following measures:

• Reasonably control leverage: Leverage refers to the multiple of borrowed funds for trading. The higher the leverage, the higher the potential returns and risks. Traders should choose appropriate leverage based on their risk tolerance.
• Set a stop loss order: A stop loss order is a pre-set order that automatically closes a position when the market price reaches a certain level. This limits a trader's potential losses.
• Cover position: When the margin balance is insufficient, traders can add margin to cover the position. This helps avoid liquidation.
• Choose the right trading variety: Choose a trading variety with less volatility to reduce the risk of liquidation.
• Diversification: Don’t invest all your funds in one trading instrument. Diversifying investments can reduce the risk caused by fluctuations in a single product.
• Avoid excessive trading: Frequent trading will increase the possibility of liquidation. Traders should control the frequency of transactions and avoid excessive pursuit of gains and losses.
• Improve trading skills: Through learning and practice, improving trading skills can help traders make more informed decisions and reduce the risk of liquidation.
• Choose a reputable trading platform: A formal trading platform will provide a complete risk control mechanism to ensure the safety of traders' funds.
• Pay attention to market dynamics at any time: Pay close attention to market news and price trends, adjust trading strategies in real time, and avoid liquidation due to emergencies.

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