Liquidation Engine
A liquidation engine is the system a leveraged trading platform uses to manage positions that breach its required margin conditions. Depending on the platform, it may reduce, close or otherwise manage positions in an attempt to prevent losses from exceeding the resources available to support them.
Why it matters to you
Liquidation is not simply a price appearing on a chart. Behind it is a risk system designed to protect the wider market and platform from losses created by leveraged positions that can no longer support themselves. Understanding this helps explain concepts such as bankruptcy price, insurance funds and auto deleveraging.
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