Liquidation

Introduction to Liquidation in Cryptocurrency

What is Liquidation?

In the dynamic world of cryptocurrency, liquidation plays a pivotal role, particularly in leveraged trading. Liquidation occurs when a trader's position is closed forcibly by the exchange because the trader's margin balance falls below the required maintenance margin level. This can be a common occurrence in volatile markets.

The Role of Leverage in Liquidation

Leverage amplifies both potential gains and losses. While it can increase a trader’s buying power, it also increases the risk of liquidation. Understanding the mechanics of leveraged trading is crucial for any investor looking to venture into these waters.