Liquidations

A liquidation is a leveraged position closed by the exchange because its margin ran out. You'll see where that line sits, why liquidations can feed on each other, and how bots count them.

With leverage, losses come out of the margin you put up. At 10×, a 10% drop would wipe out all of it, so the exchange doesn't wait that long: once only a small safety margin is left, it closes the position for you. That forced close is a liquidation.

Drag the price down and watch the margin drain.

The liquidation price sits roughly 1 ÷ leverage away from the entry: about 10% at 10×, 4% at 25×, 2% at 50×, a little less once the safety margin is counted.

Longs are liquidated when the price falls to that line; shorts when it rises to it. Real exchanges add fee and size tiers, so treat these numbers as estimates.

A sharp drop liquidates longs: the exchange sells their positions. A sharp rise liquidates shorts: the exchange buys theirs back.

Bots can watch each side separately: long liquidations and short liquidations, in dollars per time window.

Liquidations are market orders. When longs get liquidated, their forced selling pushes the price lower, which can reach the next group of liquidation prices, and so on. Traders call this a cascade.

Each bar is a group of long positions waiting at a liquidation price. Change the size of the first push and press play.

Bots can measure liquidations two ways: the dollar total in a window, or how many happened. One whale being liquidated and a hundred small traders can add up to the same dollars with very different counts.

Move the window along the hour and change its length.

The Potential long squeeze template looks for a falling price, open interest dropping at the same time, and long liquidations well above their average: price change 15m at or below −2%, open interest change 15m at or below −5%, and long liquidations at least 3× their recent average.

Press play and watch the meter. Under the replay, the liquidation condition runs on the live feed.

Three quick questions, then a bot to build.

Read the strategy and set up a bot that follows it, with the direction and the conditions it names and no others. The strategy also uses the price change and open interest from earlier lessons. Passing depends on the build alone. Once it's right, the bot fires and you see what the market did next, which won't always go your way.