Liquidation

Liquidation refers to the process in which a trader’s open leveraged position, often through a futures contract, goes against their intended goal, resulting in the complete loss of their initial investment. For instance, imagine a trader who enters a position to buy $1,000 worth of ether (ETH) at the current price of $2,000 per ETH with 10X leverage, anticipating a price increase. However, if the market moves unfavorably and the price drops below their liquidation point of $1,500 per ETH, the trader’s entire initial investment is liquidated and lost.