Cascade Liquidations and How to Avoid Them
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Cascade Liquidations and How to Avoid Them
Introduction
Cascade liquidations, also known as liquidation cascades or forced liquidations, occur in leveraged cryptocurrency trading when a sharp price movement triggers a chain reaction of margin calls. Exchanges automatically close positions of over-leveraged traders to prevent further losses, flooding the market with sell (or buy) orders that amplify the price swing.
⚠️ Disclaimer: This article is for educational and informational purposes only. It does not constitute financial advice or an investment recommendation. Cryptocurrency trading involves significant risks, including the loss of your invested capital. Always do your own research (DYOR) and consult a financial advisor before making investment decisions.
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