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Perpetual futures offer big opportunities: you can take a long or short view, use leverage, tap into the fast moving crypto market. But with high volatility comes a higher risk of liquidation. Your position is automatically closed where your margin no longer covers your losses.
An experienced trader know how fast things can turn. A sudden price move, an unexpected market swing, or a rapid price fluctuation can all trigger liquidation if you're not prepared. The key isn't avoiding risk entirely, it's managing it. Here we break down three core strategies you can use to give yourself the proper strategy to trade Perps.
In perpetual futures trading, liquidation occurs when your position is forcefully closed by the exchange to prevent further losses beyond your account balance. It's a risk control mechanism, but one that can quickly wipe out your trading capital if you're not careful.
For example: If you open a long position on Bitcoin (BTC) (expecting price to rise) and the market suddenly drops, your margin (collateral) starts shrinking. Once it falls below the maintenance margin, the position gets liquidated, automatically closed at the current market price.
Similarly, if you're in a short position (expecting price to fall) and the market moves up rapidly, liquidation can occur just as easily. Avoiding it means managing your leverage, position size, and risk exposure wisely.
Liquidation can happen for several reasons, but they all tie back to one factor: market volatility.Here are the most common triggers:
– High volatility and price swings: Sudden price fluctuations can cause your unrealized losses to spike, leading to liquidation if your margin is too small.
– Overusing leverage: Trading with high leverage (like 100x) amplifies both gains and losses. Even a 1% price move against your position can erase your collateral.
– Ignoring funding rates: Funding rate payments between long and short traders can slowly eat into your margin if you hold positions for too long.
– Poor risk control: Not setting a stop loss or over sizing your position often results in being caught off guard when market conditions change suddenly.
Understanding these risks is the first step. The next step is learning how to manage them effectively.
1. Manage Your Leverage Wisely
Leverage is a double edged sword. It can multiply your profits, but also magnify losses. Traders often make the mistake of using maximum leverage without accounting for market volatility. Let's say you open a 50x leveraged long position on ETH. A 2% drop in price could liquidate your position almost instantly. In contrast, using 5x leverage gives your trade more breathing room to absorb short term price fluctuations.
Best practices:
– Use lower leverage (3x-10x) in volatile markets or when trading less liquid tokens.
– Adjust leverage based on market conditions. High volatility requires more margin.
– Always calculate your liquidation price before confirming a trade.
2. Set Stop Loss and Take Profit Orders
One of the simplest yet most effective ways to avoid liquidation is by setting stop loss and taking profit orders. These help automatically close your position before losses escalate. A stop loss acts as a safety trigger. When the price moves against your trade by a certain percentage, the system exits the position automatically. Meanwhile, a take profit order locks in gains once your target is reached.
For instance:
If you open a long position on TON at $2.00, you could set a stop loss at $1.90 (-5%) and a take profit at $2.16 (+8%).
This way, if the market moves sharply, you're protected on both ends, capturing profits or limiting losses.
Best practices:
– Set your stop loss based on volatility, not emotions.
– Place it below key support (for longs) or above key resistance (for shorts).
– Avoid moving stop losses further away "hoping" the market will turn.
On Blum Perps, you can set both stop loss and take profit directly from the Telegram interface, making risk control simple and quick, even during rapid price swings.
3. Right-Size Your Position and Monitor Funding Rates
Your position size determines how much risk you're taking on each trade. Even with perfect timing, oversized positions can lead to forced liquidation if the market moves suddenly. A good rule of thumb: never risk more than 1-2% of your total account equity per trade. This ensures that even if you're wrong, you stay in the game.
Additionally, monitor the funding rate, the periodic fee paid between long and short traders. In highly bullish markets, longs often pay shorts, and vice versa. Ignoring this can slowly erode your margin over time, especially for longer term positions.
Best practices:
– Keep your position size small relative to account equity.
– Regularly check funding rate changes to avoid unnecessary losses.
– Avoid holding high-leverage positions overnight when volatility spikes.
Blum Perps displays live funding rate information directly inside the trading interface, so you always know your costs before opening or holding a position.
Blum makes perpetual futures trading simple, secure, and social, all within Telegram.Here's how to get started:
Step 1: Open Telegram and start Blum
Step 2: Tap "Wallet" -> Perps -> Deposit USDT or USDC on Solana or TON
Step 3: Tap "Trade" → "Perps"
Step 4: Pick a token (ASTER, PUMP, TWT, BNB, BTC, ETH, TON, SOL, etc)
Step 5: Pick "Long" or "Short" then choose your leverage up to 100×
Step 6: Set stop loss or take profit if needed
Step 7: Done
With Blum you can trade 24/7 with full control, transparent execution, and no need to switch between apps. Whether you're going long or short, you'll find everything you need right inside Telegram.
Liquidation is one of the biggest risks in perpetual futures trading, but it's also one of the easiest to manage, if you trade wisely. By combining reasonable leverage, solid risk management, and disciplined position sizing, you can trade crypto confidently even in high volatility environments.
Blum gives traders the edge with tools designed for both simplicity and safety as well as fast execution inside Telegram. Whether you're an experienced trader or just starting out, remember: surviving volatility is the key to compounding success.
Start trading smarter and avoid liquidation before it happens with Blum Perps on Telegram.
