# Liquidation in Crypto: When Margin Trading "Blows Your Account"

Have you ever heard a trader say "I got liquidated" and then disappear from the Discord group? That's when something bad has happened to their account.

**What is liquidation in simple terms?**

Suppose you have 1000 USDT, you borrow an additional 4000 USDT from the exchange ( using 5x leverage ) to buy BTC. At this point, you control a value of 5000 USDT. But if BTC drops by 20%, your account will go down to 4000 USDT - just enough to repay the loan. At this point, the exchange will automatically sell all your BTC, whether you like it or not. That is **liquidation**.

**Why does the exchange do that?**

Because the exchange must protect itself. Otherwise, you may lose additional debts that the exchange cannot recover. Liquidation is like an "automatic stop loss" to avoid worse situations.

**How to avoid liquidation?**

- **Risk management**: Don't use too high leverage (5x, 10x is dangerous)
- **Set Stop-Loss**: Stop loss early, for example at -15% to avoid hitting the liquidation threshold.
- **Monitor Liquidation Price**: Know which price will trigger liquidation, then decide whether to continue or withdraw.

Liquidation is like a flood - you can't resist it when it comes. So it's best to avoid high water from the start.