Liquidation cascades
Moments when many positions were force-closed on a coin within minutes. Often accompanied by a sharp price move.
About this section
This section catches liquidation cascades: moments when within a few minutes the exchange force-closed hundreds of thousands or millions of dollars worth of positions. A liquidation happens when a leveraged position runs out of margin and the exchange closes it at market, regardless of what the trader wants.
Such closures amplify the move by themselves: closing a long is a market sell, closing a short is a market buy. When many positions are liquidated in a row, each one pushes price further and triggers the next. That is what a cascade is.
The card shows the five-minute volume, the side - whether longs or shorts were liquidated - and how many times larger the spike is than usual for that coin. The cut-off is at least three weekly norms, otherwise ordinary market noise would fill the feed.
What the bot looks for
Over a short period of time many other traders’ trades were forcibly closed on the coin - for hundreds of thousands or millions of dollars.
Forced closures of leveraged positions sharply amplify the movement at the moment of the cascade. After this - two equally weighted options: the impulse continues (squeeze) or price pulls back against the movement once there are no more liquidations (fade).
Frequently asked questions
A forced closure by the exchange when margin is no longer enough to cover the loss. The higher the leverage, the closer the liquidation point sits to the entry price.
A cluster of positions with similar liquidation points. The first closures push price further in the same direction, which triggers the next ones, and for a while the process feeds itself.
Entering inside a cascade is the most dangerous option: the move is sharp, spreads widen and execution is unpredictable. The usual approach is to wait for the flow of closures to dry up and watch how price reacts afterwards.
Liquidations happen constantly, and without a cut-off the feed would be background noise. Three weekly norms separate a genuinely notable spike from an ordinary day.