What Is a Liquidation in Leveraged Crypto Futures Trading?

Liquidation is the forced closure of a trader's leveraged position by the exchange's risk engine. It occurs when the margin balance falls below the maintenance margin requirement, typically due to adverse price movement.

This is done to prevent the trader's losses from exceeding their collateral, ensuring the exchange does not incur a loss. The position is closed at the liquidation price, and the remaining margin, if any, is returned to the trader.