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What is crypto liquidation?

However, in the crypto space, the term liquidation is mainly used to describe the forced closing of a trader’s position due to the partial or total loss of the trader’s initial margin. This happens when they cannot meet the margin requirements for their leveraged position — i.e., they have insufficient funds to keep the trade open.

What is complete liquidation?

Complete liquidation: Closing a position with almost all of the trader's initial margin. Liquidation can occur in both futures trading and spot trading. However, traders should be aware that when buying a contract, the price is based on the asset and not on the asset itself.

What happens if the cryptocurrency price crosses the liquidation Mark?

If the cryptocurrency price crosses this mark, the position is automatically liquidated. The liquidation price depends on the trader’s position, the leverage and the amount of remaining funds in his account. There is no need to calculate the mark manually — the exchange will calculate everything for you.

Is liquidation a risk?

Liquidation occurs in both margin and futures trading. Trading with a leveraged position is a high-risk strategy, and it is possible to lose your entire collateral (initial margin) if the market makes a large enough move against your leveraged position.

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