Bitget beginner's guide: How to avoid liquidation in futures trading

Futures trading involves high leverage and high risk. One of the biggest risks is liquidation, where your position is force-closed and your margin is wiped out. This guide breaks down how to avoid liquidation by focusing on four key areas: capital management, trading strategy, real-time monitoring, and trader mindset. It's designed for everyone—from first-timers to seasoned pros.

1. Nature of liquidation in futures trading

What is liquidation in futures trading?

Liquidation occurs when your margin balance for futures trading is no longer sufficient to cover your losses. To prevent further losses, the exchange will automatically close your position—often leaving your account with zero balance. This typically happens during high market volatility, especially if you're overleveraged or not managing risk effectively.

Example scenario:

User A:
Starting capital: $10,000
Leverage: 10x
Position: Long BTC
Entry price: $50,000

Liquidation process:

1. BTC drops to $45,000 (a 10% move; the exact liquidation price may vary depending on the exchange's maintenance margin rate).

2. At 10x leverage, a 10% drop wipes out 100% of the initial capital (100,000 × 10% = 10,000).

3. The exchange liquidates the position. User A loses the entire $10,000.

4. If the price continues to fall, a collateral shortfall may occur.

Why liquidation happens

Liquidation is triggered by unexpected price swings that wipe out your margin. Leverage amplifies both gains and losses, so even small adverse movements can lead to big losses quickly. Common causes include:

Cause	Example	Key issue
Overleveraging	10x long on BTC (10% margin); a 10% price drop = instant liquidation	High leverage leaves no room for volatility, and even minor moves can cause liquidation.
No stop-loss	The trader didn't set a stop-loss as the BTC price kept dropping, leading to a full margin loss and eventual liquidation.	Without a stop-loss, holding through a downtrend can lead to severe, uncontrollable losses.
Increasing positions with unrealized gains	Adding to long positions as BTC rises increases the liquidation price, making small pullbacks risky.	Adding to a profitable position increases the liquidation price and reduces your buffer against market pullbacks.

2. Four core strategies to avoid liquidation

Strategy 1: Manage capital wisely

Effective capital management is your first line of defense. Key principles include:

1. Control your position size

￮ Limit risk per trade to 1%–2% of your account. For example, with a $10,000 account, limit losses per trade to $100–$200.

2. Choose leverage cautiously

￮ Beginners: Stick to 5x–10x leverage.

￮ High-risk trading: At 20x leverage, a 5% price move can liquidate your position. While experienced traders may adjust leverage based on their risk appetite, it's generally best not to exceed 20×.

3. Manage your margin effectively

￮ Keep your maintenance margin ratio below 80%.

￮ Set aside 20% of your account balance as emergency funds.

￮ For overnight trades, increase your margin by an additional 10%–15%.

Strategy 2: Build a solid trading system

1. Set stop-losses: Three practical methods to limit losses

• Fixed stop-loss (good for beginners):

￮ If BTC typically moves 1000 points a day, set your stop-loss at 500–800 points to avoid getting stopped out by normal volatility.

￮ Tip: Always leave a safe distance between your stop-loss and estimated liquidation price to avoid liquidation and collateral shortfall.

• Technical stop-loss (based on chart levels):

￮ Place your stop-loss 1%–2% below key support levels identified from candlestick charts.

• Capital-based stop-loss (based on loss per trade):

￮ Limit your maximum loss per trade to 1% of your account. Example: On a $10,000 account, your maximum loss per trade is $100. Use this to calculate your stop-loss based on position size.

2. Take-profit strategy: Lock in gains and reduce drawdowns

• Set a favorable risk-reward ratio (aim for 1:2): If your stop-loss is 500 points, your take-profit target should be at least 1000 points.

• Take profit at resistance level: When the price reaches previous highs or major resistance zones, consider taking partial profits.

• Scale out in batches (lock in gains and leave room for more upside): Close 50% of the position first, then set a trailing stop on the remainder—e.g., auto-close if price pulls back by 2%.

3. Diversify your positions

• Trade multiple assets (3–5 unrelated coins):

￮ Spread your positions across major assets like BTC and ETH, and include sectors such as DeFi or memecoins to reduce the impact of a single price crash on your portfolio.

• Use a multi-timeframe strategy (combining short- and mid-term trades)

￮ Use short-term trades to capture intraday moves and mid-term trades to ride broader trends—avoiding missed opportunities and overtrading.

• Blend different strategies (trend-following + reversal):

￮ Allocate some capital to follow market trends and keep some on hand to buy dips in oversold conditions. This helps balance risk across varying market environments.

Strategy 3: Monitor the market in real time

1. Build a price alert system

￮ Set price alerts

▪ Use in-app tools or platforms like TradingView to set alerts at key levels, such as near your stop-loss ($29,800), margin threshold (150%), or technical support zones.

▪ Example: If your BTC stop-loss is set at $29,500, create a price alert at $29,700 to give yourself time to manually close the trade.

2. Track market movements

￮ Macro events: Monitor central bank policy changes, geopolitical risks, and key data releases (e.g., NFP, CPI), as they can trigger sharp market swings.

▪ Example: In 2023, multiple crypto crashes were caused by SEC-related regulatory news. Reducing exposure early could have prevented liquidation.

￮ Volatility shifts: If BTC's daily range exceeds 10%, consider reducing your position size or pausing trading altogether.

￮ Platform updates: Pay attention to exchange announcements—such as margin adjustments, contract expirations, or system maintenance—to avoid unexpected risks.

3. Use risk management tools

￮ Liquidation calculator: Input your leverage, position size, and entry price to estimate your liquidation price. Make sure your stop-loss is well above the liquidation price.

￮ Auto-deleveraging: Bitget reduces your position size when your margin ratio drops, helping lower the risk of liquidation.

￮ API-based monitoring: Advanced users can use API tools to implement auto-close strategies for handling extreme market conditions.

Strategy 4: Strengthen your trading mindset

Emotional trading is one of the most common causes of liquidation. Staying disciplined is essential.

1. Stick to your plan strictly

￮ Set clear rules for each trade, (entry, stop-loss, take-profit) and write them down on paper or digitally. Avoid changing your plan on impulse.

￮ Example plan: Long BTCUSDT at $30,000, stop-loss at $29,500, take-profit at $31,000, max risk 1% ($100).

￮ Review each trade afterward to check if you followed your plan.

2. Accept losses

￮ Treat small losses as part of the game. Set a daily loss cap (e.g., 3%) and stop trading once it's hit.

￮ Avoid "revenge trading" or increasing position sizes just to recover losses.

3. Control FOMO and fear

￮ FOMO (Fear of missing out): Don't blindly chase pumps. Wait for a pullback or confirmation before entering.

￮ Fear: Don't panic-sell during crashes. Stick to your stop-loss plan and avoid emotional decisions.

4. Simulate trades

￮ Beginners should use a demo account to test strategies and gain familiarity with leverage, stop-loss, and market volatility.

￮ Simulate realistic capital levels (e.g., if you plan to trade with $10,000, use the same in your demo) to align your mindset with real conditions.

3. Special liquidation scenarios and countermeasures

Scenario	Characteristics	Response strategies
Flash crash	- Price breaks through the stop-loss level instantly - Liquidity temporarily dries up - Often triggered by major macro events	1. Use market stop-losses instead of limit stop-losses. 2. Avoid trading during high-volatility periods (e.g., 30 minutes before and after key data releases) 3. Lower leverage to under 3x 4. Set a buffer stop-loss (e.g., target SL at 29,500, actual SL at 29,300)
Funding fee erosion	- Longer holding periods increase costs - Margin is slowly drained - Common in strong one-sided trends	1. Switch to intraday trading strategy 2. Choose futures with lower funding fees 3. Hedged positions (e.g., spot vs. futures hedging)
Chain liquidation	- Multiple correlated assets crash simultaneously - Cross-asset margin spreads risk across positions - Overall account risk surges	1. Trade less correlated assets to limit contagion risk 2. Set a maximum drawdown limit for your total account (e.g., ≤10%) 3. Use sub-accounts to isolate risk and manage exposure separately

4. FAQ on liquidation

Q1: Can I recover any remaining funds after liquidation?

A: In most cases, no. When a position is liquidated, any remaining margin is transferred to Bitget's Insurance Fund. The fund takes over the liquidated position and settles it. If the exit results in a profit, the fund increases; if it results in a loss, the fund absorbs it. Bitget's Insurance Fund is designed to cover the market risk associated with user liquidations.

Q2: How is the liquidation price calculated at different leverage levels?

A: The liquidation price is influenced by several factors:

• Leverage: Higher leverage means your liquidation price is closer to the entry price.

• Margin ratio: Defined by the platform's minimum maintenance requirement.

• Position direction: For long positions, the liquidation price is below the entry price. For short positions, the liquidation price is above the entry price

Tip: Use Bitget's built-in calculator to estimate your liquidation price in advance.

Q3: Why was my position liquidated even though my stop-loss wasn't triggered?

A: The "estimated liquidation price" shown on the exchange is for reference only. Actual liquidation may occur earlier due to the following reasons:

1. Low liquidity: During high volatility, thin order books can cause slippage, triggering liquidation prematurely.

2. Fees and funding rates: Funding fees (e.g., for perpetual futures) and transaction costs gradually reduce your margin, raising your effective liquidation risk.

3. Bitget's risk management system: When your margin ratio nears the critical threshold, Bitget may initiate partial liquidation to reduce exposure. This is intended to minimize losses and preserve part of your position, which can happen before reaching the displayed liquidation price.

Q4: Why can't I find my liquidation price on the candlestick chart?

A: Your position was internally absorbed by the exchange. In typical cases, the transaction is recorded on the candlestick chart if another trader takes over your position after liquidation. However, during a collateral shortfall (when nobody is available to take the position), Bitget's Insurance Fund absorbs it at the bankruptcy price, which is calculated internally by the platform. Since this process occurs outside the regular order matching system, the liquidation price doesn't appear on the chart.

Q5: How should I adjust my mindset after liquidation?

A: Consider taking the following steps:

1. Take a cooling-off period: Pause trading for at least a full day to avoid emotionally driven decisions.

2. Review the incident thoroughly: Log the cause of the liquidation (Was leverage too high? No stop-loss? Poor judgment? ).

3. Practice in demo mode: Test new strategies using a simulated account.

4. Restart cautiously: When returning to live trading, start with small positions and low leverage, and increase gradually as you rebuild confidence.

Q6: At what margin ratio should I add more margin?

A: On Bitget, the margin ratio is calculated as: margin ratio = maintenance margin ÷ margin balance. The higher the margin ratio, the greater the risk. We recommend managing your margin in tiers using the following alert levels:

• 80%–90% (Yellow alert): You'll receive an email warning from the platform. Consider reducing your positions or adding funds.

• 100% (Red alert): The system will begin partial liquidation to manage risk.

• Over 100% (Liquidation level): Auto-deleveraging is triggered. If your position is reduced to the lowest tier, the remaining portion will be executed at the bankruptcy price via the Insurance Fund.

Bitget employs a gradual deleveraging method as a risk management measure to help user minimize losses and retain their positions.

1. Order cancellation: In isolated margin mode, only open orders tied to the affected position are canceled. In cross margin mode, all open orders—including those from isolated positions—are canceled.

2. Position offsetting (netting): Opposing positions across trading pairs are offset (excluding isolated margin).

• If you're using cross margin and hold opposing positions on the same pair, they will be netted out to reduce exposure.

3. Partial liquidation: Positions are reduced one tier at a time (excluding isolated margin positions).

• If you're at Tier 2 or above, the system will try to partially liquidate your position before proceeding to full liquidation.

4. Full liquidation: Remaining positions are executed at the bankruptcy price using the Insurance Fund (excluding isolated margin).

• For Tier 1 users with no open orders, if the maintenance margin rate (MMR) reaches 100%, the system will liquidate the remaining positions at the bankruptcy price, settling the trade with the Insurance Fund.

• The bankruptcy price is the price where the user's account balance drops to zero and is usually not displayed on the candlestick chart.

5. Summary and recommendations

Avoiding liquidation requires a complete risk management framework. Begin with capital management by using low leverage and limiting losses per trade. Build a clear trading strategy with defined entry and exit rules, and apply strict stop-loss discipline. Stay alert with real-time monitoring and price alerts. Most importantly, maintain a calm, rational mindset.

For beginners: Start with demo trading and use minimal leverage.
For intermediate traders: Keep a trading journal and fine-tune your hedging strategies.
For advanced traders: Consider setting up an automated risk management system.
Remember, the market will always offer new opportunities, but protecting your capital is the key to long-term success. A solid, risk-conscious trading system will always outperform any short-term gain. Your survival in the market depends on it.

Disclaimer: This content does not constitute investment advice. Cryptocurrency futures trading carries significant risk and may result in the loss of your entire capital. Always understand the risks and trade responsibly based on your financial situation.