Liquidation
The forced closure of a leveraged position when its margin can no longer cover losses.
In futures trading, you post margin (collateral) to open a leveraged position. If the market moves against you far enough that your losses approach your margin, the exchange automatically closes the position to prevent your balance going negative. That forced close is a liquidation.
Higher leverage means a smaller adverse move triggers liquidation. This is why risk-first traders size positions from their stop distance rather than chasing maximum leverage — a stop-loss closes the trade on your terms, before the exchange does it on its terms.
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