Liquidation
Automatic position closure when loss reaches collateral — you lose everything.
Liquidation occurs when the collateral value on a leveraged position falls below the minimum requirement. The exchange automatically closes the position to protect the borrowed capital.
How liquidation happens:
•Open a BTC long position with 10x leverage at $50,000
•Liquidation price is ~10% below entry price (~$45,000)
•If BTC drops to $45,000, exchange liquidates the position
•You lose your entire stake (margin)
How to protect yourself:
•Use stop-loss orders before reaching liquidation price
•Use low leverage (2x-5x max for beginners)
•Isolated margin — limits loss to defined amount
•Monitor liquidation levels and position health
Mass liquidations cause "cascading" price drops — chain reaction on the market.