What Is the Risk of ‘Liquidation’ in Leveraged Cryptocurrency Futures Trading?
Liquidation is the forced closing of a trader's leveraged position by the exchange when the losses cause the account equity to fall below the maintenance margin level. This happens automatically to prevent the account balance from turning negative, protecting the exchange's solvency.
In crypto trading, high leverage amplifies both gains and losses, making liquidation a common and significant risk, especially during periods of high market volatility.
