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Crypto
Liquidation
When a leveraged position is automatically closed by the exchange because the trader's margin has run out.
Liquidations are very common in crypto because of high leverage. When many liquidations happen at once it can cause a "liquidation cascade" that pushes the price even further. Exchanges show real-time liquidation heatmaps so traders can see danger zones.
It's the exchange forcibly selling your position before your losses become bigger than the money you put in.
Real world: A trader opens a 50x long on Bitcoin at $60,000. If Bitcoin drops to $59,400 the position is liquidated. The trader loses their entire margin and sometimes more in extreme cases.
💡 Liquidation is the brutal way leveraged trading ends when the market moves against you.