How to Reduce Your Chances of Getting Liquidated?

1. Watch the Margin Ratio

To avoid liquidation, you need to pay close attention to your Futures Margin Ratio. When your margin ratio reaches 100%, some, if not all, of your positions will be liquidated.

The calculation method of margin ratio is Maintenance Margin Rate = Adjustment Factor / Leverage.

Therefore, if your margin balance drops below the maintenance margin rate - the exchange will liquidate your positions.

In case of a price drop, please ensure that you have enough margin balance in your futures account. The higher the margin balance you have, the lower the liquidation price.

You can use the Huobi Futures Liquidation price calculator to calculate how increasing your wallet balance will lower the liquidation price.

2. Use the stop-loss function to limit and control possible losses

A Stop-loss order is a conditional order that is executed at a specified price after a given stop price has been reached. Once the stop price is reached, it will buy or sell at the market/limit price depending on your order parameters.

A stop-loss is designed to limit an investor's loss on a position that makes an unfavorable move. For instance, you set up a 20% stop loss from your entry price.

Assume your entry order was executed at $20,000. The stop-loss order will be triggered when the price drops -20% from $20,000.

By setting a stop-loss function, you can exit a losing position earlier and avoid getting liquidated.

3. Make an early planning

Let's consider the following scenario: Suppose the wallet balance is 100 USDT, the trader enters the market with 20x leverage at the price of 21,500 USDT, and open a long BTC/USDT position worth 2,000 USDT. In this example, the liquidation price is $ 20,527.3.