A liquidation is when the exchange force-closes your leveraged trade because you ran out of margin. You don't choose to exit — the exchange does it for you, at market, and your collateral is gone. Longs get liquidated when price falls; shorts when it rises.
Good news for beginners: if you only trade spot (buying the actual coin, no leverage), you can't be liquidated. Liquidations only happen with borrowed money — and they're the engine behind crypto's violent candles. see live liquidations on the terminal →
Tap any section below to go deeper ↓ — skim the headlines if you're in a hurry.
How does it actually happen?
When you open a leveraged position you put up margin (your collateral). As price moves against you, the losses eat into that margin. The moment it drops below the exchange's maintenance threshold, your position hits its liquidation price and the exchange closes it automatically — you don't get a vote.
That forced close is a market order, so in a fast market it can fill even worse than your liq price. Either way: margin gone.
Long vs short — who gets hit?
It depends which way you bet. Your entry sits in the middle; move far enough the wrong way and the exchange closes you:
- Long (betting up) → liquidated when price falls. Your forced sell pushes price down even more.
- Short (betting down) → liquidated when price rises. Your forced buy pushes price up even more.
Why liquidations cascade (the scary part)
Here's the feedback loop that moves crypto 5% in minutes: a liquidation is a forced market order, and that order pushes price further the same way — which drags the next batch of positions to their liquidation price, which forces more orders, and so on. One liquidation feeds the next.
That's why a calm chart can suddenly avalanche: a cluster of liq levels gets hit and the dominoes fall. On the terminal you watch the total stack up live.
Leverage = how close you are to the cliff
The single biggest factor in when you get liquidated is leverage. More leverage puts the liquidation price much closer to your entry — so a small, totally normal move wipes you out.
How to not get liquidated
- Use low leverage. 2–5× gives a trade room to breathe. 50× is a countdown timer.
- Set a stop-loss above your liquidation price. Exit on your terms, with margin left — before the exchange exits you on its terms with nothing left.
- Risk only 1–2% per trade. Size it so a stop-out is a scratch, not a disaster.
- Know your liq price before you enter. Every exchange shows it. If it's a normal day's move away, you're over-leveraged.
Quick check — you long BTC at 10× and it drops about 10%. What happens?
Key takeaways
- Liquidation = the exchange force-closing your leveraged trade when margin runs out.
- Longs die on the way down, shorts on the way up.
- They cascade — that's crypto's violent candles.
- Lower leverage + a real stop-loss = you decide your exit, not the exchange.
FAQ
What is a liquidation in crypto?
A liquidation is the forced closing of a leveraged position when the trader runs out of margin — the exchange closes it at market automatically. Long positions are liquidated when price falls; shorts when price rises. You can only be liquidated with leverage; spot positions cannot be liquidated.
What happens when you get liquidated?
The exchange force-closes your position at market price and you lose the margin (collateral) backing it. Because it is a forced market order it can fill worse than your liquidation price in fast markets, and the order itself pushes price further, which can trigger more liquidations.
Why do liquidations cause big price moves?
Each liquidation is a forced market order that pushes price further in the same direction, dragging the next batch of leveraged positions to their liquidation price. That feedback loop causes cascades — why crypto can move several percent in minutes.
How do I avoid getting liquidated?
Use low leverage (2–5×), always set a stop-loss above your liquidation price, risk only 1–2% of your account per trade, and check your liquidation price before entering — if it is only a normal day's move away, you are over-leveraged.