Jargon Buster: "Liquidation" & "Leverage"
Demystifying terms from the recent sell-off.
News of "$1 Billion Liquidated" is everywhere. Let's break it down:
Leverage:Using borrowed money to amplify trading positions. It boosts gains but also losses.
**Liquidation:** When a leveraged trade loses too much value, it's automatically closed by the exchange to repay the loan. This forced selling can crash prices further.
The recent dip was exacerbated by a cascade of these liquidations . The lesson? Understand the tools you use. High leverage = high risk.