You borrowed a market stall's whole stock, put down one basket as a deposit, and promised to sell it all by evening.
Then prices dip 10%. The owner walks over, takes your deposit, and locks the stall. You didn't just lose a trade. You got liquidated.
That's leverage in plain terms. With ten times leverage, you put up $1 to control $10, so a drop of roughly 10% against you can wipe out your whole deposit. Real exchanges close you a little sooner, and fees and funding costs eat into your margin too.
3 things worth knowing:
1. Liquidation happens in futures and margin trading, not in plain spot buying.
2. It's triggered by the mark price, a reference price blended from several exchanges, not just the last price on your chart.
3. The exchange closes the position automatically. You don't get a vote.
Whatever you do, find your liquidation price before you open a position, not after.
What should I explain next: funding rates or margin modes?
Not financial advice. #Binance #CryptoEducation #Futures
$BTC
Then prices dip 10%. The owner walks over, takes your deposit, and locks the stall. You didn't just lose a trade. You got liquidated.
That's leverage in plain terms. With ten times leverage, you put up $1 to control $10, so a drop of roughly 10% against you can wipe out your whole deposit. Real exchanges close you a little sooner, and fees and funding costs eat into your margin too.
3 things worth knowing:
1. Liquidation happens in futures and margin trading, not in plain spot buying.
2. It's triggered by the mark price, a reference price blended from several exchanges, not just the last price on your chart.
3. The exchange closes the position automatically. You don't get a vote.
Whatever you do, find your liquidation price before you open a position, not after.
What should I explain next: funding rates or margin modes?
Not financial advice. #Binance #CryptoEducation #Futures
$BTC