Contract trading on platforms like OKX can be highly profitable but also comes with risks like auto-liquidation. This guide explains why contracts get liquidated and how to prevent it.
Understanding Contract Auto-Liquidation
Auto-liquidation occurs when your position hits the liquidation price due to:
- Market Volatility - Sudden price swings trigger forced closure.
- Insufficient Margin - Your collateral can't cover losses.
- Leverage Settings - Higher leverage = higher liquidation risk.
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Common Causes of Unwanted Liquidation
- Default Stop-Loss Settings: Some platforms preset stop-loss triggers.
- Incorrect Leverage: Using 100x? Even small moves can liquidate you.
- Margin Imbalance: Not maintaining adequate margin percentages.
How to Prevent Auto-Liquidation
Adjust Your Leverage
- Start with lower leverage (5-10x) until experienced.
Set Manual Stop-Loss
- Override default settings with your preferred thresholds.
Monitor Margin Ratios
- Maintain at least 50% above the liquidation margin.
| Action | Effect |
|---|---|
| Reduce leverage | Decreases liquidation risk |
| Add collateral | Extends price movement buffer |
FAQ: Auto-Liquidation Concerns
Q: Why did my profitable position liquidate?
A: You likely had a take-profit order set too close to entry or used excessive leverage.
Q: Can I recover liquidated funds?
A: No - liquidated positions are permanently closed to prevent further loss.
Q: How do I check my liquidation price?
A: The platform calculator shows it based on current leverage and margin.
Q: Is contract trading safer than spot?
A: Contracts carry higher risk but offer hedging opportunities when used responsibly.
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Advanced Tips
- Partial Close Positions: Secure profits gradually.
- Diversified Collateral: Use stablecoins to reduce volatility impact.
- Avoid Weekend Trading: Thin markets increase slippage risks.
Remember: Auto-liquidation protects you from unlimited losses. The key is proper setup and risk management.