Position opens with collateral
A leveraged trade uses margin to support a larger market exposure.
LIQUIDATION RISK
MARGIN / LEVERAGE / FORCED CLOSURE
Crypto liquidation explained.
Liquidation can occur when a leveraged position no longer has enough margin to satisfy the market's requirements. It is one of the most important risks to understand before trading perpetuals or other leveraged crypto products.
MARGIN RISKFORCED CLOSUREVOLATILITY
WHY LIQUIDATION HAPPENS
Leverage reduces the room for adverse price movement.
The exact formula varies by venue and market. In general, a position becomes vulnerable when losses reduce account or position equity relative to the maintenance margin requirement.
Market moves against the trade
Adverse price movement reduces unrealized P&L and available equity.
Margin becomes stressed
As losses grow, the distance to the market's maintenance requirement can shrink.
Liquidation conditions are reached
The venue may begin reducing or closing the position under its rules.
Fast moves can accelerate risk
Sudden price changes can move a position toward liquidation quickly.
Displayed estimates can change
Liquidation information may move as margin, funding, fees and market prices change.
RISK CHECKLIST
Know the downside before entering.
BEFORE ENTRY
Review the position.
SIZETotal exposure
Large positions relative to collateral can increase sensitivity to price moves.
LEVERAGELeverage multiple
Higher leverage generally leaves less room for adverse movement.
MARGINAvailable collateral
Understand how much equity supports the position.
DURING THE TRADE
Monitor changing conditions.
PRICEMarket movement
Volatility can change risk rapidly.
FUNDINGRecurring funding
Funding payments may affect account equity over time.
EXITClosing workflow
Know how to reduce or close the position deliberately.
RELATED GUIDES
Build a complete risk picture.
LIQUIDATION FAQ
Quick answers.
What is liquidation?+
It is a forced reduction or closure of a leveraged position when margin no longer meets the market's requirements.
Can liquidation happen quickly?+
Yes. High leverage and volatile markets can reduce the distance to liquidation quickly.
Is the displayed liquidation price guaranteed?+
No. Risk information can change as market price, fees, funding and margin conditions change.
UNDERSTAND THE RISK
Open HOODBTC Trade ↗Liquidation is part of leveraged trading.
Review the live position details and margin information before opening any leveraged trade.