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What is Liquidation?
Liquidation occurs when a leveraged position is forcibly closed because losses have consumed your margin (collateral). It means you lose your entire invested amount on that trade.
Full Explanation
In leveraged trading, liquidation happens when the market moves against your position enough to consume your margin (collateral). The exchange forcibly closes your position to prevent further losses. Liquidation price depends on leverage used: higher leverage = closer liquidation price. For example, at 10x leverage, a ~10% adverse move triggers liquidation. At 100x, just ~1%. Liquidations cause cascading sell pressure in volatile markets. Beginners should avoid leverage or use very low leverage (2-3x) with strict stop-losses.
Example
Trader opens a 20x long on Bitcoin at ₹50,00,000. Liquidation price: ~₹47,50,000. Bitcoin drops 5% and the trader loses their entire ₹1,00,000 margin.
Related Terms
Last updated: 2026-03-21
