// Definition
Liquidation is when an exchange forcibly closes a leveraged position because the losses have used up the margin backing it.
Explained simply
Every leveraged position has a liquidation price. If the market reaches it, the exchange closes the trade and the margin is lost. The higher the leverage, the closer the liquidation price is to the entry.
Large waves of liquidations can push price sharply in one direction, because each forced close adds to the move.
Tip
Always know your liquidation price before entering, and keep your stop-loss well before it.
For education only, not financial advice. Trading is risky and you can lose money.