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Liquidation price
A liquidation price is the market price at which a leveraged position's remaining collateral falls to the platform's minimum, so the platform closes the position automatically. For a long position it sits below the entry price; for a short, above it. The more leverage, the closer it sits.
What it means for you. Reaching the liquidation price usually means losing most or all of the margin on that position, and the close happens at whatever price the market gives. Fees, interest and funding payments can move the level closer over time. Platforms calculate it differently, so the number the platform shows matters more than your own estimate.
Sources: CFTC Glossary, Cheng, Deng, Wang and Yu: Liquidation, Leverage and Optimal Margin in Bitcoin Futures Markets (arXiv), SEC Investor Bulletin: Understanding Margin Accounts · checked 4 October 2026
Liquidation
Liquidation is the forced sale of a borrower's or trader's collateral when its value no longer covers the loan or position. In DeFi lending, other users repay part of the debt and receive the collateral at a discount; on futures platforms the position is closed.
What it means for you. Liquidation usually costs more than the shortfall: the discount given to the liquidator comes out of your collateral, and it can happen in minutes during a sharp price move. On a lending protocol, watch the health factor; below 1.0 your position can be liquidated.
Sources: Aave documentation: Liquidations, BIS Quarterly Review: DeFi risks and the decentralisation illusion, CFTC: Understand the Risks of Virtual Currency Trading · checked 4 October 2026