Popular explanation of liquidation and liquidation

Liquidation means that a trader’s account is forced to close due to excessive losses. Liquidation occurs when the loss amount of a trading position exceeds the account's margin. Position closing refers to the behavior of traders actively closing trading positions. Position closing can be stop-profit or stop-loss, or it can be the trader's initiative to adjust the position based on market conditions.

What is liquidation and liquidation?

Liquidation means that a trader’s account is forced to close due to excessive losses. Liquidation occurs when the loss amount of a trading position exceeds the account's margin.

Close position refers to the behavior of traders actively closing trading positions. Position closing can be stop-profit or stop-loss, or it can be the trader's initiative to adjust the position based on market conditions.

The difference between liquidation and liquidation

• Initiative: Liquidation is initiated by traders, while liquidation is done proactively by traders It is passively enforced.
• Reason: Position closing may be due to stop profit, stop loss or position adjustment, while position liquidation must be due to excessive account losses.
• Consequences: Liquidating a position will generally not cause significant losses to traders, while liquidating a position may result in the liquidation of the trader's account.

How to avoid liquidation?

• Reasonable control of leverage: Excessive leverage will amplify trading risks and increase the possibility of liquidation.
• Develop a risk management plan: Set stop loss levels, manage risk exposure, and avoid out-of-control losses.
• Strictly abide by trading disciplines: Do not frequently chase ups and downs, and do not stubbornly hold losing positions.
• Continuous learning and improvement: Continuously improve trading knowledge and skills, increase the probability of profit, and reduce the risk of liquidation.

The meaning of closing a position

• Lock-in profit: Close the position when the trading position is profitable, and you can lock in the profit.
• Control losses: Close your trading position when it loses money to control the size of the loss.
• Adjust positions: According to changes in market conditions, timely closing positions can adjust positions and optimize the risk-return ratio.

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