Liquidation

Liquidation is the automatic, forced closing of a leveraged position once its loss reduces account equity below the exchange’s maintenance-margin requirement. The liquidation price is the level at which this happens; with higher leverage it sits closer to your entry, so an ordinary move can be fatal. Many exchanges charge a liquidation fee and may route the close through an insurance fund or auto-deleveraging, meaning your fill can be worse than the trigger price. With cross-margin, a single liquidation can pull from your whole balance, and cascading liquidations across many traders can accelerate the very move that is closing you.

In plain English — Liquidation happens when a leveraged position moves against you far enough that your margin can no longer cover the loss, so the exchange forcibly closes it — usually with a fee, and often at a worse price than you would have chosen. Higher leverage means a smaller adverse move triggers it. In crypto, where prices can gap violently, liquidation can occur fast and during the exact moments you most want to hold on.

You open a 20x long BTC perp at $60,000. Roughly a 5% drop to ~$57,000 can exhaust your margin and liquidate the whole position — and in a fast wick you may be closed even after a quick recovery, locking in the loss.