[//]:content-type-MARKDOWN-DONOT-DELETE ##What Is Liquidation? In futures trading, liquidation occurs when a user's account margin is insufficient to maintain their open positions. When the account hits the risk threshold, the system automatically liquidates risky positions to prevent further losses. **Example** A user with 10,000 USDT uses 10x leverage to go long on BTC at a price of 100,000 USDT. Liquidation Process: 1. BTC price drops to 90,000 USDT (a 10% drop) 2. Under 10x leverage, the user's loss reaches 100% of the margin 3. Liquidation triggered, wiping out the 10,000 USDT margin - In real trading scenarios, taking into account fees and the risk of negative balance, liquidation will occur before the 10% drop is reached. ##When Is Liquidation More Likely? High leverage: Higher leverage not only amplifies profits but also magnifies risks. Even small market fluctuations may cause insufficient margin and trigger liquidation. Extreme market volatility: The cryptocurrency market is highly volatile, with prices capable of sharp swings in a short time. If the market moves against your position, the risk of liquidation increases significantly. Failure to add margin in time: When margin becomes insufficient due to price fluctuations, failing to promptly add margin will cause the system to liquidate your positions to prevent further losses. ##How to Reduce the Risk of Liquidation? 1. Set suitable leverage: The higher the leverage, the higher the risk. Beginners are advised to start with lower leverage, giving more room to adjust positions or add margin during market volatility. 2. Monitor the mark price closely: Gate's futures use the mark price to calculate profit & loss and margin ratios. The mark price is derived from the spot index price and the premium index, representing the fair price in the futures market. Keeping a close watch on the mark price can help you decide when to adjust positions or add margin. 3. Set take-profit/stop-loss (TP/SL) conditions: Setting TP/SL conditions in advance allows for automatic execution during sudden price swings. This can prevent losses from widening or help lock in profits, especially useful for traders who cannot monitor the market constantly. 4. Manage positions wisely: Avoid allocating all your funds to a single contract. Diversifying your positions helps reduce the impact of volatility in one market, lowering the overall risk of liquidation. 5. Add margin promptly: Gate provides a liquidation alert feature, allowing users to receive notifications when their positions are at risk. This enables timely adjustments or margin additions to effectively prevent liquidation. Gate reserves the final right of interpretation for this product.