Liquidation occurs when a position no longer has enough margin to support it.
When this happens, the position is automatically closed to prevent further losses. Liquidation outcomes are determined by the rules and operation of the applicable third-party service, not by Blockchain.
Why liquidation happens
Liquidation occurs when:
- The market moves against your position
- Your margin becomes insufficient
- High leverage increases risk
Example
If you open a leveraged position and the price moves significantly against you, your margin may drop below the required level.
At that point, the position will be liquidated automatically.
How to reduce liquidation risk
You can reduce liquidation risk by:
- Using lower leverage
- Setting Auto-close conditions
- Monitoring market volatility