Liquidation, explained in simple words.
It means your leveraged trade is closed by force because your losses used up all your margin (your safety deposit).
Leverage = Trading with borrowed money
Long liquidation = Price falls and your buy trade closes automatically
Short liquidation = Price rises and your sell trade closes automatically
When many traders are liquidated together, forced market selling can push the price down even further. This chain reaction is called a liquidation cascade.
How to stay safer: Use low leverage, always set a stop loss, and keep extra margin.
Do you trade with leverage, or do you avoid it completely? Tell us below!
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