Liquidation in crypto trading is when an exchange automatically closes (or "liquidates") your leveraged trading position to prevent further losses. It happens on futures, perpetual contracts, or margin trading platforms (like Binance, Bybit, or Coinbase Advanced) when the market moves against you and your account's margin balance drops below the required maintenance margin level.Quick breakdown:
You open a position with leverage (e.g., 10x or 50x), using a small amount of collateral to control a much larger position.
If the price goes the wrong way (against your long or short), unrealized losses eat into your collateral.
When losses hit the liquidation price (also called "liq price"), the exchange forcibly sells/buys your position at market price to repay the borrowed funds.
You lose most or all of your initial margin; in extreme cases (especially high-leverage trades), it can trigger a cascade liquidation across the market.
Example: You long Bitcoin at $60,000 with 20x leverage and $1,000 collateral. If BTC drops to ~$57,000 (depending on the platform's rules), your position gets liquidated and you're left with little or nothing.Liquidation protects the exchange and other traders but is one of the biggest risks in leveraged crypto trading. Always use stop-losses, lower leverage, and monitor your margin ratio!#CryptoLiquidation #LeverageTrading #FuturesTrading #CryptoRisk #MarginCall
