Trading concepts
Understanding liquidation
Liquidation happens when a position no longer has enough margin to remain open. Traders should understand liquidation levels before opening a position.
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Why liquidation matters
A leveraged position needs margin to stay open. If market movement reduces the margin below the required level, the position can be closed by liquidation.
Liquidation is not only a price level on a screen. It is a risk boundary that should be considered before the trade is placed, especially during volatile market conditions.
- Review the liquidation level before confirming an order.
- Avoid using all available balance as margin for a single position.
- Consider reducing position size when liquidation sits too close to entry.