Binance liquidations occur when a trader’s position on the Binance exchange is forcibly closed due to insufficient margin to cover potential losses. This automatic closure prevents further losses when market movements go against a leveraged position. It is a risk management measure employed by the exchange to protect against negative equity.
Context
Reports of Binance liquidations frequently appear in crypto news, often signaling periods of high market volatility. Significant liquidation events can cascade, leading to rapid price movements and affecting overall market sentiment. These occurrences highlight the inherent risks associated with leveraged trading in the digital asset space.
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