What Is Forced Liquidation in Crypto? Understand the Risks Before Using Leverage

Forced liquidation in crypto refers to the automatic closure of a leveraged position by the exchange when the margin balance is no longer sufficient to keep the position open. It’s a common risk in margin and futures trading. When the market moves against your position, your account balance may drop below the maintenance margin level, triggering liquidation to prevent further losses. Understanding how forced liquidation works, why it happens, and how to avoid it is essential for protecting your capital. This article explains the mechanics of liquidation, the differences from margin calls, and offers practical tips to help you minimize risk when trading cryptocurrencies.