Liquidation Price: What It Is and How to Avoid It in Trading

When you trade on margin, your liquidation price, the price at which your position is automatically closed to prevent further losses. Also known as stop-out level, it’s not a suggestion—it’s a hard cutoff built into your broker’s system. If the market moves against you and hits this price, your trade shuts down instantly, and you lose your entire margin. No warning. No second chance. This isn’t theoretical. In crypto trading alone, over 60% of new traders get liquidated within their first month—not because they picked the wrong coin, but because they didn’t understand this one number.

The margin trading, using borrowed funds to increase position size might look like a shortcut to big profits, but it doubles your risk. Your stop-out level, the point where your broker forces your position to close depends on your leverage, entry price, and the size of your position. Higher leverage? Lower liquidation price. Smaller account? Even a tiny dip can wipe you out. You don’t need to predict the market perfectly—you just need to know where your exit will be triggered. Most traders focus on entry points. The smart ones calculate their liquidation price before they click buy.

It’s not just about avoiding losses. Knowing your liquidation price helps you size your trades properly. If you’re risking $500 on a trade, and your liquidation price is only 2% away, you’re not trading—you’re gambling. The right position size keeps your liquidation price far enough from your entry to let the market breathe. That’s how professionals stay in the game. They don’t chase pumps. They manage risk like a system.

What you’ll find below aren’t theory-heavy guides or vague tips. These are real posts from traders who’ve been liquidated, rebuilt, and learned the hard way. You’ll see how to set stop-losses that actually work, how leverage changes your risk profile, and why your broker’s margin calculator isn’t always your friend. There’s also advice on using risk-reward ratios, tracking your position in real time, and spotting when the market is about to trigger a cascade of liquidations. This isn’t about getting rich overnight. It’s about staying in the game long enough to get good.