What is Liquidation?
Forced closing of a position when losses exceed margin.
Details
Liquidation happens when a leveraged position's losses approach or exceed the maintenance margin, forcing the exchange to close it — potentially losing the full margin or more. How close the liquidation price is depends on leverage, maintenance margin and volatility. The core defenses are controlling leverage, setting stop-losses and keeping enough margin.
Key Points
- Position is force-closed when losses exceed maintenance margin
- Higher leverage puts the liquidation price closer
- Control leverage and set stop-losses to avoid it
FAQ
What is Liquidation?
Forced closing of a position when losses exceed margin.
What are the key points about Liquidation?
Liquidation happens when a leveraged position's losses approach or exceed the maintenance margin, forcing the exchange to close it — potentially losing the full margin or more. How close the liquidation price is depends on leverage, maintenance margin and volatility. The core defenses are controlling leverage, setting stop-losses and keeping enough margin.
Is this term related to a specific coin?
It applies broadly across the crypto industry.
Related
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