> For the complete documentation index, see [llms.txt](https://yubit.gitbook.io/yubit/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://yubit.gitbook.io/yubit/derivatives-trading/futures-faq/how-to-reduce-liquidation-risk.md). # How to Reduce Liquidation Risk? In perpetual futures trading, **liquidation** occurs when your margin is no longer sufficient to maintain your position, causing the system to automatically close it. To lower your risk of forced liquidation, consider the following best practices: *** 1. ### **Use Lower Leverage** Higher leverage means even small price movements can quickly deplete your margin. **Recommendation for beginners:** 1–5× leverage. *** 2. ### **Maintain Adequate Available Margin** Keeping extra funds in your futures account helps prevent your risk level from rising too quickly. When your margin ratio increases, **add margin promptly** to avoid nearing the liquidation threshold. *** 3. ### **Set Stop-Loss Orders** Placing a stop-loss ensures that your position closes automatically when the market moves against you, preventing losses from expanding to liquidation levels. *** 4. ### **Avoid Using Your Entire Balance for One Position** Never allocate all your margin to a single trade. Diversify your position size and avoid going “all-in,” which significantly increases liquidation risk. *** 5. ### **Avoid Trading During Extreme Volatility** Major news events, economic data releases, or sudden market movements can cause sharp price swings. Liquidation risk is significantly higher during these periods. *** 6. ### **Watch the Mark Price (Not the Last Traded Price)** Liquidation is triggered based on the **Mark Price**, not the latest transaction price. Even if the last price moves sharply, your liquidation risk remains lower as long as the Mark Price is stable. *** 7. ### **Avoid Adding to Losing Positions** Adding margin to a losing trade (“averaging down/up”) increases your exposure and can rapidly raise your liquidation risk. *** 8. ### **Use Scaled Entries and Take-Profits** Entering and exiting positions in batches is a more stable approach than committing the full position at once, helping spread out risk. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://yubit.gitbook.io/yubit/derivatives-trading/futures-faq/how-to-reduce-liquidation-risk.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.