All terms
Forced closure of a leveraged position when your collateral runs out.
When a leveraged position moves against you far enough, the platform closes it automatically to protect the lender. Your collateral is gone and you often pay a liquidation fee on top.
Large clusters of liquidations create cascades. Forced selling pushes price further, which triggers more liquidations, which is why crypto crashes can be so abrupt.
Liquidation heatmaps show where clusters sit. Price often moves toward them, because that is where the liquidity is.
That liquidation means losing what you borrowed. It means losing your collateral, plus a penalty, and it happens automatically at a price you agreed to when you opened. Nobody calls you first.
Common questions
Can I lose more than I put in?
How do I avoid being liquidated?
Where this comes up on the site
The guides that actually use this word, rather than a list of everything we have written.
Where to go next
More trading terms
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