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Liquidation (also commonly referred to as 'forced liquidation' or 'margin call') refers to the situation in leveraged trading when an investor's losses reach a certain level, causing the margin in their account to be insufficient to maintain their position. To protect themselves (to avoid the investor owing money, commonly known as being 'underwater'), the trading platform will forcibly liquidate the contracts held by the investor (regardless of whether they are long or short positions).
Core Principle: Margin and Leverage
To understand liquidation, you must first understand the two core elements of contract trading:
Margin (Margin)
Margin is the collateral that investors use to open and maintain contract positions. You only need to invest a small portion of funds as margin to operate larger amounts of contracts.