What Is the Difference between ‘Soft Liquidation’ and ‘Hard Liquidation’?

Soft liquidation is a risk management approach where an exchange attempts to reduce the size of a position gradually or automatically reduce the leverage before a full, forced closure. This may involve partial closing or margin tier adjustments.

Hard liquidation, or forced liquidation, is the full closure of the entire position once the maintenance margin is breached. Soft liquidation aims to give the trader a chance to avoid full closure and is less disruptive to the market.