How to avoid liquidation on Bybit?

To avoid liquidation on Bybit, use lower leverage (5x–10x), set strategic stop-loss orders, monitor your margin ratio closely, and trade in isolated margin mode to limit risk per position.

Aug 04, 2025 at 02:57 am

Understanding Liquidation on Bybit

Liquidation on Bybit occurs when a trader’s margin balance falls below the maintenance margin required to keep a leveraged position open. This typically happens when the market moves against the position, and the equity in the account drops to a critical level. Liquidation is automatic—Bybit closes the position to prevent further losses that exceed the available margin. To avoid this, traders must monitor their liquidation price, which is clearly visible on the Bybit interface once a position is opened.

Use Appropriate Leverage

High leverage amplifies both gains and losses. While it may seem attractive to maximize profit potential, it also significantly increases the risk of liquidation. For example, using 50x leverage on a $100 position means a 2% adverse price move could trigger liquidation. Stick to lower leverage ratios, such as 5x–10x, especially for new traders. This reduces the sensitivity of your position to market fluctuations and gives you more breathing room before reaching the liquidation threshold.

• Choose leverage based on your risk tolerance and trading strategy
• Avoid maxing out leverage even if the platform allows it
• Consider reducing leverage during high-volatility events like news releases

Set Stop-Loss Orders Strategically

A stop-loss order is one of the most effective tools to avoid liquidation. Unlike liquidation, which is triggered by the exchange when your margin runs out, a stop-loss lets you control the exit point. Place your stop-loss at a level that balances risk and realism—too tight, and you may get stopped out prematurely; too wide, and you risk nearing liquidation. On Bybit, stop-loss orders can be set in the “Order” tab when opening or managing a position.

• Determine your stop-loss based on technical levels (support/resistance)
• Use trailing stop-loss to lock in profits while minimizing risk
• Ensure your stop-loss is placed outside of normal market noise

Monitor Your Margin Ratio and Equity

Bybit displays your margin ratio in real time on the position panel. If this ratio drops below 100%, your position is at risk of liquidation. For instance, a margin ratio of 50% means you’re halfway to liquidation. Traders should check this number frequently, especially during volatile market conditions. Also, monitor your available balance—adding more margin manually (via “Add Margin”) can increase your buffer and push the liquidation price further from the current market price.

• Refresh your position screen every 5–10 minutes during active trading
• Enable margin call notifications in Bybit app settings
• Manually add margin if the ratio approaches 110% or lower

Utilize Isolated Margin Mode

Bybit offers two margin modes: Cross and Isolated. In Cross mode, your entire wallet balance acts as collateral for all open positions. While this can delay liquidation, it also risks wiping out your entire account if one position goes bad. Isolated margin mode caps risk per position by assigning a fixed amount of margin to each trade. This makes it easier to calculate liquidation levels and prevents one losing trade from affecting others.

• Switch to Isolated mode in the position settings before opening a trade
• Allocate only the necessary margin for each trade
• Review the isolated margin’s liquidation price before confirming the trade

Avoid Common Mistakes That Lead to Liquidation

Many liquidations stem from preventable errors. One common mistake is holding onto losing positions too long in hopes of a reversal—a practice known as “hoping instead of managing.” Another is ignoring funding rates in perpetual contracts; negative funding can erode your margin over time. Always have a clear exit plan before entering a trade. Also, avoid trading during low-liquidity periods like weekends or major holidays when slippage can unexpectedly trigger liquidation.

• Don’t ignore funding rate signs—positive or negative
• Avoid overtrading or revenge trading after a loss
• Never leave positions open without a stop-loss or margin buffer

Frequently Asked Questions

Q: Can I recover funds after a liquidation on Bybit?

No, once a position is liquidated, the funds used as margin are partially or fully lost. Bybit uses an insurance fund to cover any negative balance, but your initial margin is not recoverable.

Q: What is the difference between partial and full liquidation on Bybit?

Partial liquidation reduces your position size to bring the margin ratio back above 100%, while full liquidation closes the entire position. This depends on how far your equity falls below the maintenance margin.

Q: Does Bybit notify me before liquidation?

Yes, Bybit sends a margin call alert when your margin ratio drops to around 110%. This is a warning that you’re approaching liquidation and should act immediately.

Q: Can I change my margin mode after opening a position?

No, you cannot switch between Cross and Isolated margin modes once a position is open. You must close the position first, then reopen it with the desired margin mode.