Derivatives 1 min read
Liquidation
Also known as: Liq, Forced Close, Margin Call
Forced closure of a leveraged position when margin falls below the maintenance requirement.
Why it matters for charts
- Liquidation heatmaps show clustered stop zones. Price often trends toward them («liquidity magnets»).
- Long liq cascades show up as sharp red candles with huge volume.
- Short liq cascades are the classic short squeeze — vertical green candles.
Lessons
- High leverage + thin liquidity = you are the exit liquidity.
- Liquidation clusters attract price. Keep stops away from obvious zones.
- After a big liq flush, markets often reverse violently as leverage resets.