HOW TO PREVENT GETTING LIQUIDATED WITH YOUR CRYPTO TRADING BOT (2024)

Liquidation is a nightmare that every trader who uses leverage dreads. It can result in losing your investment and incurring extra costs. However, it is not entirely unavoidable. In this article, we'll explore how to prevent liquidations and use them to prevent further losses.

USING ISOLATED MARGIN WHILE TRADING CRYPTO WITH YOUR BOT

When trading futures, margin is necessary to open positions. There are two types of margin modes available on most exchanges:

Isolated margin and cross margin. Isolated margin limits the potential loss to a specific position, while cross margin combines all available funds to support open positions, potentially increasing risk and leverage.

GETTING LIQUIDATED

Several reasons could lead to getting liquidated, including using high leverage, not setting a stop loss, and technical issues such as a sudden loss of liquidity or trading glitch. To avoid getting liquidated, it's crucial to use a stop loss while entering a trade.

USING ISOLATED MARGIN TO PROTECT YOU IN CASE OF A FLASH CRASH

Isolated margin can help limit your losses in case of a black swan event that causes price movements within a short time. Using isolated margin allows you to set aside a specific amount of margin for each individual trade, reducing the risk of losing all your funds in one go.

MY EXPERIENCES

In manual trading, getting liquidated can be painful, costly, and a reminder that mistakes can happen. However, in crypto bot trading, you can avoid getting liquidated by testing your strategies, keeping track of your leverage, and optimizing the usage of your margin.

CONCLUSION

To prevent getting liquidated while trading crypto with your bot, it's essential to use a stop loss and manage your margin and leverage carefully. Using isolated margin can also help limit your losses in case of a flash crash. If you're interested in learning more, send me a DM or check out the full blog on our website by clicking the link in the comments section of this post. Remember, receiving liquidation emails is never good news, so let's aim to avoid them altogether.

The opinion expressed in this LinkedIn post is for general informational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.