2.6 How to Reduce the Risk of Liquidation on Electra

Liquidation occurs when the margin in your account becomes insufficient to maintain your open position. To avoid this scenario and minimize the risk of liquidation, consider the following strategies:

1. Use Moderate Leverage

• Impact of leverage: Higher leverage reduces your safety margin and brings the liquidation price closer.

• Recommendation: Choose leverage that matches your experience level and strategy. Beginners should start with low leverage (e.g., 2x–5x).

1. Monitor Your Margin

• Regular checks: Frequently review your margin level and top it up if necessary.

• Safe zone: Ensure your Margin Ratio stays in the safe zone to prevent automatic position closure.

1. Set Stop-Loss Orders

• Automated protection: Place stop-loss orders to automatically close positions when a certain price is reached.

• Benefit: This limits your losses and preserves your deposit, even if the market moves against you.

1. Diversify Your Positions

• Reduce concentration risk: Avoid allocating all your capital to a single position or asset.

• Risk mitigation: Distribute funds across multiple trades to lower the overall risk of liquidation.

1. Avoid Trading in Highly Volatile Markets

• Volatility risk: Markets with high volatility can quickly move against your position, especially with high leverage.

• Timing matters: Plan trades during periods of lower volatility and stay informed about market news.

1. Regularly Monitor the Market

• Position updates: Frequently check your open positions and market trends.

• Use analysis tools: Apply technical analysis to anticipate potential price movements and adjust your positions accordingly.

1. Maintain a Reserve Balance

• Buffer funds: Keep part of your funds as a free balance in your account.

• Advantage: This helps prevent forced position closures during minor price fluctuations.

1. Risk Only What You Can Afford to Lose

• Capital management: Invest only what you are prepared to lose.

• 2%–5% rule: Limit each trade to affect only a small portion of your deposit, typically 2%–5%.

1. Trade with a Cool Head

• Avoid emotional trading: Stay disciplined and avoid trading under the influence of greed or fear.

• Stick to your strategy: Don’t increase leverage impulsively in an attempt to recover losses.

By following these tips, you can significantly reduce the likelihood of liquidation and protect your investments on the Electra DEX platform.