Trading Articles - Binance Blog

Crypto Futures Basics: What Is Liquidation and How to Avoid It?

<h2 style="line-height:1.7999999999999998;margin-top:8pt;margin-bottom:8pt;"></h2><h2 style="line-height:1.7999999999999998;margin-top:8pt;margin-bottom:8pt;">Key Takeaways:</h2><ul style="padding-inline-start: 48px;" class=" list-paddingleft-2"><li>Leveraged positions are prone to volatile price swings, which may cause a trader’s equity to plunge into negative balance instantaneously and result in significant losses.</li><li>Liquidation mechanisms help prevent traders’ accounts from falling into negative equity.</li><li>Multiple strategies can be implemented to prevent liquidation, such as monitoring margin, using stop-losses or lowering the amount of leverage.</li></ul>Crypto derivatives have gained a lot of popularity over the years, attracting traders from all over the world to Binance Futures. Given the high volatility in the cryptocurrency market, these financial instruments can help increase traders' profits within a short period through the use of leverage. However, it is important to remember that there are also considerable risks associated with leveraged trading. One of the main factors to succeed in futures trading is strategizing each trade carefully and understanding how much capital is at risk. <img src="https://public.bnbstatic.com/image/cms/blog/20220217/26b3d64b-ca6f-462f-acdd-41a58e45c8d7.png"/>In <a href="https://www.binance.com/en/futures" target="_blank"><span style="font-size: 12pt; font-family: "IBM Plex Sans", sans-serif; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">futures trading</a>, where leverage is easily accessible, knowing how much capital and leverage is vested into a trade will help you understand your total risk exposure, because in some cases, losing trades can lead to liquidation.<h2 style="line-height:1.38;margin-top:18pt;margin-bottom:6pt;">What Is Liquidation in Crypto Futures Trades?</h2>The term liquidation is traditionally used to describe the conversion of assets into cash. But in futures trading, liquidation is something you want to avoid by all means. Leveraged positions are prone to volatile price swings, which may cause a trader’s equity to plunge into negative balance instantaneously. In such cases, losses can be more significant than the maintenance margin, leading to liquidation. This process is involuntary and automatic if a trade has come to meet specific price criteria. Liquidation can happen either slowly or quickly, depending on the amount of leverage used in a trade. For example, with lower amounts of leverage, liquidation won’t happen as soon as a minor correction occurs in the market. Nonetheless, higher amounts of leverage can deplete traders’ initial investment with little to no effort. <a href="https://www.binance.com/en/futures" target="_blank"><img src="https://public.bnbstatic.com/image/cms/blog/20220217/d02ccaf4-da5b-4089-9362-ae53864d68dd.png"/></a> <h2 style="line-height:1.7999999999999998;margin-top:8pt;margin-bottom:8pt;">When Would Liquidation Occur?</h2>A forced <a href="https://www.binance.com/en/support/faq/7ba80e1b406f40a0a140a84b3a10c387" target="_blank"><span style="font-size: 12pt; font-family: "IBM Plex Sans", sans-serif; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">liquidation</a> process happens when a trader can no longer meet the margin requirements of their leveraged position.Let’s say you were to open a long BTC/BUSD leveraged position with $100 as your account balance. You used 20x leverage to enter a trade worth $2,000. If the price of BTC were to drop by only 5%, your account balance would be wiped out as you can no longer fulfill the margin call demands to keep the trade afloat. This is what is called liquidation in futures trading.<img src="https://public.bnbstatic.com/image/cms/blog/20220217/519c1f57-872d-49f7-9840-ef9faaf8b3ee.png"/>Although this is a basic example, it is crucial to know your limits and how much you’re willing to lose on a trade to understand how much leverage you should use. Binance Futures has introduced leverage limits on new accounts to protect users from the dangers and unintended consequences of using high leverage. It is imperative to fully understand the impact of leverage and the circumstances under which it can significantly damage the probability of a profitable trade. Read more about <a href="https://www.binance.com/en/support/faq/25edcd7fe0e544839d0847b8cbb2e400" target="_blank"><span style="font-size: 12pt; font-family: "IBM Plex Sans", sans-serif; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">how to reduce your chances of liquidation</a>. <h2 style="line-height:1.7999999999999998;margin-top:8pt;margin-bottom:8pt;">Quick Tips to Prevent Liquidation</h2>To remain on the safe side, traders must have a plan in place with planned exits before entering any trade. There are multiple strategies that can be implemented to avoid risks, but you should consider the following to avoid liquidation. <h3 style="line-height:1.38;margin-top:16pt;margin-bottom:4pt;">1. Use Stop-Loss Orders </h3>The most obvious answer to avoid liquidation is simply using a stop loss. A stop loss is a trading tool Binance Futures offers, which allows traders to set a price to automatically exit a trade should the price of an asset hit this predetermined level. Using a stop loss in conjunction with a <span style="font-size: 12pt; font-family: "IBM Plex Sans", sans-serif; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">liquidation calculator,  can help protect a trader’s account from incurring significant losses, and especially from liquidation.Although you may still lose some funds, the stop loss tool will protect you from losing everything on a trade and from having to pay liquidation fees. Besides, who wants to lose and get penalized for it? By using a stop-loss, you can prevent this from happening. <h3 style="line-height:1.7999999999999998;margin-top:8pt;margin-bottom:8pt;"><span style="font-size: 14pt; font-family: "IBM Plex Sans", sans-serif; color: #434343; font-weight: 400; font-variant-numeric: normal; font-variant-east-asian: normal; vertical-align: baseline; white-space: pre-wrap;">2. Decrease the Amount of Leverage</h3>Leverage has a significant impact on the longevity of a trade. While it may be enticing to use large amounts of leverage, it could also magnify your losses.As shown in the example above, the high amount of leverage can hurt a trader even when a small price change occurs. Thus, using lower leverage will help you navigate a volatile crypto market smoothly and safely. <h3 style="line-height:1.7999999999999998;margin-top:8pt;margin-bottom:8pt;">3. Monitor the Margin Ratio</h3>Another option that traders can implement is monitoring the <a href="https://www.binance.com/en/support/faq/360033162192" target="_blank"><span style="font-size: 12pt; font-family: "IBM Plex Sans", sans-serif; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">margin ratio</a>. When the margin ratio hits 100%, the position will be liquidated. To avoid this outcome, traders can add more margin to their trade to return leverage and reduce their position). This method is akin to keeping a position alive when the trade is heading further in the wrong direction. Adding more margin or reducing leverage is similar to starting with less leverage in the first place. The difference is that maintaining a specific margin ratio can be done over more extended periods and is a dynamic solution.<img src="https://public.bnbstatic.com/image/cms/blog/20220217/34515a68-7d02-4612-ad4e-7ab3835e1c0d.png"/><h2 style="line-height:1.38;margin-top:18pt;margin-bottom:6pt;">In Summary</h2>Liquidation is a scary word that traders would much prefer to avoid if possible. The good news is that traders have several tools and trading strategies that they can implement to avoid being liquidated. From stop losses to monitoring the margin ratio, traders have multiple resources to avoid liquidation. If you think you might want to learn more about trading, Binance Futures offers everything a trader may need to trade responsibly, like the <a href="https://academy.binance.com/en/articles/the-ultimate-guide-to-trading-on-binance-futures" target="_blank"><span style="font-size: 12pt; font-family: "IBM Plex Sans", sans-serif; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">Ultimate Guide to Trading on Binance Futures</a>. Additionally, the platform offers incredibly competitive rates, fees, and multiple financial instruments for traders. Read the following support items for more information about trading futures:<ul style="padding-inline-start: 48px;" class=" list-paddingleft-2"><li><a href="https://www.binance.com/en/support/faq/360040016512" target="_blank"><span style="font-size: 12pt; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">(Support) How to Place Stop Loss Order and Take Profit Order</a></li><li><a href="https://www.binance.com/en/blog/futures/how-binance-takes-responsible-trading-seriously-and-you-should-too-421499824684900595" target="_blank"><span style="font-size: 12pt; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">(Blog) How Binance Takes Responsible Trading Seriously, and You Should Too</a></li><li><a href="https://www.binance.com/en/support/faq/360033525271" target="_blank"><span style="font-size: 12pt; color: #1155CC; background-color: transparent; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">(Support) Liquidation Protocol</a></li><li>And many more<a href="https://www.binance.com/en/support/faq/c-4?navId=18#/4/18" target="_blank"><span style="font-size: 12pt; color: #1155CC; background-color: transparent; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;"> Binance Futures FAQ</a> topics...</li></ul> <a href="https://www.binance.com/en/futures" target="_blank"><img src="https://public.bnbstatic.com/image/cms/blog/20220217/bed23269-840f-42bf-a51f-0e60b500a45b.png"/></a>

2021-08-02

Celebrate Lunar New Year With Binance

Here's how we're celebrating Lunar New Year: Crypto prizes, Zodiac NFTs, Mystery Boxes, super-rare Binance swag and more!<img src="https://public.bnbstatic.com/image/cms/blog/20220124/017c4384-29ee-4a4d-a306-34e57e71c62d.png" style=""/>Happy Lunar New Year! The Binance team wishes everyone a healthy, prosperous and lucky Year of the Tiger.If you're looking for some festive, auspicious activities to join—look no further! From January 25 to February 6, take part in fortune-filled activities and ring in the new year with:<ul class=" list-paddingleft-2" style="list-style-type: disc;"><li>NFTs</li><li>Mystery Boxes </li><li>Binance swag</li><li>Up to $98,888 in crypto prizes </li><li>...And much more! </li></ul>Remember, Lunar New Year is all about your loved ones, so don't forget to invite family, besties and your four-legged friends if you have any.  <h3 style="line-height:1.7999999999999998;margin-top:8pt;margin-bottom:8pt;">Binance Activities</h3><a href="https://www.binance.com/en/activity/collect-and-win/BN1691191043522695169" target="_blank"><img src="https://public.bnbstatic.com/image/cms/blog/20220126/1623f4df-9b9e-404c-867a-ac4c20248d97.png"/></a>To wish all our users good luck, health and longevity for the Lunar New Year, we've prepared a special Tiger Year Collect & Win Promotion. Simply collect new year wishes and generate the Binance Tiger, and you'll be qualified to share a rolling prize pool worth up to 38,888 BUSD! <a href="https://www.binance.com/en/activity/collect-and-win/BN1691191043522695169" target="_self"><span style="font-size: 12pt; font-family: "IBM Plex Sans", sans-serif; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">Start collecting and sharing the blessings! </a> <h3 style="line-height: 1.8; margin-top: 8pt; margin-bottom: 8pt;">Binance NFT </h3><a href="https://www.binance.com/en/activity/marketing-campaign/05af840f8be84b3b978f2812b97ee7f2" target="_blank"><img src="https://public.bnbstatic.com/image/cms/blog/20220126/e5030034-397c-4542-87bc-5e0f85a65bc7.png"/></a>Usher in the Year of the Tiger with Binance NFT’s Roaring Tiger challenge! Start collecting Zodiac NFTs from January 25 to February 7, and you’ll get a chance to win exclusive Lunar New Year prizes. <a href="https://www.binance.com/en/activity/marketing-campaign/05af840f8be84b3b978f2812b97ee7f2" target="_self"><span style="font-size: 12pt; font-family: "IBM Plex Sans", sans-serif; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">Collect now and share festive rewards! </a><h3 style="line-height:1.7999999999999998;margin-top:8pt;margin-bottom:8pt;"></h3> <h3 style="line-height:1.7999999999999998;margin-top:8pt;margin-bottom:8pt;">Binance Socials</h3><a href="https://www.binance.com/en/survey/2d1a868768b54a70b68fda78443777d8" target="_blank"><img src="https://public.bnbstatic.com/image/cms/blog/20220126/bdd9caf4-fc19-4557-96ce-6bc360571adb.png"/></a>We'd like to wish our Binance community—the best community ever—a year full of peace and happiness! To keep you warm, fashionable and healthy this Year of the Tiger, we're giving out some never-before-seen Binance merch, from Binance silver rings and bathrobes to Binance massage guns. Keep reading to see how you can win:We know it's the year of the tiger, a.k.a cats, but we're not sure if crypto Twitter and our Binance community love cats or dogs more? Let's test! <ul style="padding-inline-start: 48px;" class=" list-paddingleft-2"><li>Post a picture of your cats or dogs with any Binance element on <a href="https://www.instagram.com/binance/?hl=en" style="text-decoration-line: none;"><span style="font-size: 12pt; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">Twitter</a> or <a href="https://www.instagram.com/binance/?hl=en" style="text-decoration-line: none;"><span style="font-size: 12pt; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">Instagram</a> and add the corresponding hashtag #BinanceCat or #BinanceDog.</li></ul>Over $1,000 in BNB and super rare Binance merch is up for grabs—bonus points for creativity! <h3 style="line-height:1.7999999999999998;margin-top:8pt;margin-bottom:8pt;">Fiat</h3><a href="https://www.binance.com/en/activity/marketing-campaign/5e4146b7b3b94b4fa2fb1c6f741434e2" target="_blank"><img src="https://public.bnbstatic.com/image/cms/blog/20220126/75549a66-7876-40bf-9639-d7430504ad15.png"/></a>Happy Lunar New Year! To welcome the abundance of wealth and joy this upcoming Lunar New Year, Binance is rewarding users who purchase crypto via <a href="https://www.binance.com/en/buy-sell-crypto?channel=hzBankcard" style="text-decoration-line: none;"><span style="font-size: 12pt; font-family: "IBM Plex Sans", sans-serif; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">credit or debit card</a> from January 31 to February 6! Make repeated and consecutive fiat transactions during the activity period to win a Mystery Box from <a href="https://www.binance.com/en/nft/event/gameofferinglandingpage" style="text-decoration-line: none;"><span style="font-size: 12pt; font-family: "IBM Plex Sans", sans-serif; color: #1155CC; font-variant-numeric: normal; font-variant-east-asian: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">Binance NFT's Gaming Series</a>—guaranteed for users who make a valid fiat transaction every day. <a href="https://www.binance.com/en/activity/marketing-campaign/5e4146b7b3b94b4fa2fb1c6f741434e2" target="_blank">Visit our landing page</a> for more details.

2022-01-25

Binance Labs Invests in Movement Labs to Bring Smart Contract Security and Parallelization to Ethereum

<figure data-block-id="8bb2e92b-f304-4923-956d-666416687370" data-type="imageFigure"><img contenteditable="false" src="https://public.bnbstatic.com/image/cms/blog/20240501/f90fb965-9469-4ba0-b2e5-c56b53f222be" naturalwidth="1600" naturalheight="900" adaptive="true"><figcaption></figcaption></figure><a target="_blank" rel="noopener noreferrer nofollow" appurl="" href="https://labs.binance.com/" customevents="[object Object]">Binance Labs</a>, the venture capital and incubation arm of Binance has invested in Movement Labs, the first integrated blockchain network, integrating the security of move and parallel execution through a zero-knowledge rollup.Movement Labs will support Sui Move, Aptos Move, and an embedded EVM interpreter MEVM—empowering both Sui, Aptos, and EVM users to use the L2. This modular approach represents an innovative direction for parallelized virtual machines while remaining integrated with Ethereum's liquidity, security, and ecosystem toolings. Movement's Move-EVM allows developers using Move and Solidity to deploy formally verified code at runtime, effectively blocking the execution of common attack vectors such as reentrancy.Yi He, Co-Founder of Binance and Head of Binance Labs commented: “Movement's technology and modular approach addresses the need for an integrated blockchain network, unlocking the potential for increased security and speed. At Binance Labs, we are always seeking first movers shaping the industry, and we look forward to seeing how Movement will continue to grow.”Movement Lab's mission is to bring Move execution to new networks and environments. The team is also building the Movement SDK, Movement CLI, Fractal, Hyperlane messaging infrastructure, and the Movement Shared Sequencer to provide paramount interoperability between all Move-based environments and other networks. “Movement Labs was founded out of a need for better smart contract security and higher throughput use cases in crypto. Move was designed to be able to power-intensive applications like Facebook on-chain and our mission is to bring it to Ethereum in a crypto-native way. We are excited to partner with Binance Labs to fuel this mission,” said Rushi Manche, Co-Founder of Movement Labs.###About Movement Labs:Co-founders, Rushi Manche and Cooper Scanlon, early builders in the Move ecosystem, founded Movement Labs in 2022 as the first integrated blockchain network, powering the fastest and most secure Layer Two on Ethereum. Designed to pair smart contract security and parallelization with EVM liquidity and user bases, Movement is bringing the MoveVM to Ethereum through its flagship L2 and connected rollups with the Move Stack. For more information about Movement Labs and a guide to participate in the devnet, please visit: <a target="_blank" rel="noopener noreferrer nofollow" appurl="" href="https://movementlabs.xyz/" customevents="[object Object]">movementlabs.xyz</a>, follow on X <a target="_blank" rel="noopener noreferrer nofollow" appurl="" href="https://twitter.com/movementlabsxyz" customevents="[object Object]">@movementlabsxyz</a> and on <a target="_blank" rel="noopener noreferrer nofollow" appurl="" href="https://t.co/E1Q1XAPIFD" customevents="[object Object]">Discord</a>.<h4 data-block-id="b7d1ca25-98c0-40e1-9acc-4abc2877fab2">About Binance Labs</h4>As the venture capital arm and accelerator of Binance, Binance Labs has now grown to be worth over $10 billion. Its portfolio covers 250 projects from over 25 countries across six continents and has a return on investment rate of over 14X. Fifty of Binance Labs’ portfolio companies are projects that have gone through our incubation programs. For more information, follow Binance Labs on <a target="_blank" rel="noopener noreferrer nofollow" appurl="" href="https://twitter.com/BinanceLabs" customevents="[object Object]">X</a>.Disclaimer: The information provided in this article is intended for informational purposes only and does not constitute investment advice, endorsement, analysis, or recommendations with respect to any financial instruments, investments, or issuers. This article may contain forward-looking statements which are by nature subject to risks and uncertainties. Investment in cryptocurrency and DeFi projects involves substantial risk, including the risk of complete loss. This article does not take into account the investment objectives, financial situation, or specific needs of any particular person and each individual is urged to consult their legal and financial advisors before making any investment decisions.

2024-05-01