# How does f(x) Protocol minimize liquidations?

f(x) Protocol uses its rebalancing mechanism to minimize any risk of liquidation. This means scenarios where a sudden market drop that would normally liquidate your entire long position just before a rally are unlikely to occur. However, this doesn't eliminate the risk of losing money as leverage amplifies both potential gains and losses.

xTokens (v1): In highly extreme scenarios, leveraged xTokens could potentially lose all of their value. However, the protocol's primary goal is to prevent this. Multiple [stability-mechanism](https://fxprotocol.gitbook.io/fx-docs/more/f-x-protocol-1.0/stability-mechanism "mention") are in place to ensure this doesn't happen.

xPOSITION (v2): If your position reaches a price level that would normally trigger liquidation on a regular perpetual exchange, it will instead be rebalanced to a different leverage level. While this operation incurs a small fee, it keeps you as much as possible exposed to the market, giving you a chance to recover. In extreme cases where the rebalancing operation fails, liquidation may occur to protect fxUSD's backing and peg. But there is a very small risk of this occurring.\
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Learn more by following the link below.

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[rebalancing-the-position-liquidation-brake](https://fxprotocol.gitbook.io/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake)
{% endcontent-ref %}