When trader’s Initial Margin Level hits the minimum margin to keep a position open (Maintenance Margin), it triggers liquidation which is the forced closing of a trader’s position.
- You deposit 0.01 BTC and open a 1 BTC buy order with a 100x leverage. However, the market price went the opposite direction and you hit the Maintenance margin of 1%.
- As your trade position is now in a loss, the exchange’s liquidation algorithm automatically closes the deal.
Keep in mind that the higher the leverage, the smaller the percentage of price change allowance to lead to the trigger to liquidate position.