$ qubo learn derivatives/04

Liquidations and crowded trades

A liquidation happens when a leveraged position loses so much that its margin no longer covers it. The venue closes the position automatically, at market.

Forced closures push the price further in the same direction: liquidated longs are sold, liquidated shorts are bought. That can trigger more liquidations, a cascade.

Cascades are more likely when many traders hold the same leveraged bet: high open interest, extreme funding, and positions clustered near the same price levels.

Liquidation data shows where the forced flows happened. It explains violent moves after the fact; it does not tell in advance when a cascade will start.

// rule to remember

// your turn

In Perps Hyperflow, find the largest liquidation of the day and check the price move around that time.

Educational content only. Not investment advice. Past data does not predict future results. Risk disclosure