Liquidation
Leveraged trading effectively stacks the exchange's money on top of yours to hold a bigger position. The exchange won't risk losing what it lent, so before your losses exceed your margin, it force-closes the position. That's liquidation. It happens regardless of your intent, without warning, at market price.
Get a feel for it with numbers. Open a 10x long at $60,000 and your liquidation sits near $54,000 — about 10% down. In practice, exchanges require maintenance margin (a minimum collateral buffer) plus a liquidation fee, so your liquidation price sits a bit closer than the naive math suggests. Around -5% at 20x; around -1% at 100x. Considering Bitcoin moves 1–2% within an hour on plenty of days, a high-leverage liquidation price is 'within reach at any moment.'
Liquidation is usually judged not on the last traded price but on the mark price, an average across several exchanges. It's a safeguard against being unfairly liquidated by one venue's momentary glitch print — but flip it around, and it means you can be liquidated even when the traded price on your screen never touched your liquidation level, as long as the mark price did. Your exact liquidation price is always visible on the order screen.
At the market level, liquidations can chain-react. A sharp drop liquidates a batch of longs; liquidations execute as market sells, pushing price lower, which trips the next tier of liquidation prices — dominoes. That's a liquidation cascade. Many of those long-wick moves where price craters and snaps back within minutes are made exactly this way.
Avoiding liquidation isn't glamorous: lower the multiplier so your liquidation price sits far away, decide in advance on a stop-loss that exits long before liquidation would, and keep position sizes small relative to the account. Note that all three are about 'not getting eliminated,' not about 'making money' — that's the point.
What the data actually shows
Liquidation cascades leave footprints on the chart as volume explosions. Barobara's volume spike + red candle historical record includes many of these forced-liquidation sell-offs — and right afterward, price fell further in some cases and bounced in others, without a clear lean either way. It's a past distribution, not a prediction. And separately from liquidation, the certain costs (trading fees and funding) are laid out in the fee summary. Think of liquidation as the worst-case scenario stacked on top of those costs.
Common misconceptions
'Just use the liquidation price as your stop-loss?' Liquidation is the most expensive stop-loss there is. You lose most of your margin, a liquidation fee gets tacked on, and in fast markets you can be closed out at worse prices than the math implied. Exiting at the same level with your own stop order almost always loses less.
'The exchange hunts my liquidation price?' There's no evidence anyone targets individual accounts. What is true is that many traders cluster their liquidation prices around similar levels, so when price reaches that zone, cascading liquidations amplify the move. It's structure, not conspiracy.
FAQ
Q. Can I lose more than my margin in a liquidation?
Most crypto futures exchanges are designed so that, on isolated margin, you lose at most that position's margin; if a violent move produces losses beyond it, an insurance fund or similar typically covers the difference. On cross margin, though, your entire account balance is collateral — one position can take all of it.
Q. Where do I check my liquidation price?
Once a position is open, the exchange shows its liquidation price on the position screen. Adding margin moves it further away; increasing the position or accumulating losses pulls it closer. On perpetuals it also drifts slightly with each funding settlement, so if you hold for a long time, checking periodically is the safe habit.