Stop Out and Liquidation are two commonly used trading terms, and investors can understand the difference between Stop Out and Liquidation from the following aspects:
1. Liquidation refers to the situation that in the process of trading, due to the development of the market ** in the opposite direction and the investor's expectations, there is a large loss, resulting in the account balance is not enough to maintain the minimum margin requirement, and thus the position is forced to be liquidated. This usually happens when investors use high leverage, and if there is a large volatility in the market, it is easy to trigger liquidation. Liquidation is characterized by suddenness and uncontrollability, and investors will lose their positions when liquidation occurs, and may suffer huge losses as a result.
2. Closing a position means that the investor closes the position and ends the holding of **. Different from liquidation, liquidation is a trading operation actively carried out by investors, and investors can flexibly close positions according to their own judgment and expectations. For example, when investors think that they have obtained the expected returns, they can choose to close the position, or when the market trend is inconsistent with the expectation, they can close the position and stop the loss in time to protect the safety of funds.
3. The risks of liquidation and liquidation are different. Liquidation occurs passively, and investors are often unable to take further action to recover their losses when they are liquidated. The liquidation is carried out actively, and investors can decide whether to close the position at any time according to the market situation, so as to better control the ** and risk.
4. The impact of liquidation and liquidation is different. Liquidation usually occurs when the market is volatile, resulting in significant losses. The impact of closing a position depends on the investor's holding time, the size of the position and the market volatility, and the investor can control the profit and loss ratio by closing the position in batches.
5. In order to better manage the situation and prevent liquidation, investors should control the leverage of funds and set up take-profit and stop-loss. Leveraged trading can magnify gains, but it also comes with a high level of risk. Investors should be cautious in using leverage and avoid excessive use of leverage to reduce the probability of liquidation. In addition, in the process of trading, reasonable setting of stop loss is also an important means to protect the safety of funds. Stop-loss can help investors close their positions in time when the market reverses and reduce losses.
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