Liquidation Definition

Liquidation is the forced closing of a position, typically because an account's margin has fallen below the required level.

What is Liquidation?

Liquidation is used by brokers to protect against losses exceeding available account equity.

It usually occurs automatically once losses reach a broker's stop-out level.

A leveraged position being automatically closed after losses reduce account equity below the required margin level is a liquidation.

Leverage allows traders to control a larger position size using a smaller amount of capital.

A liability is a financial obligation or debt owed by an individual or company to another party.

LIBOR, the London Interbank Offered Rate, was a benchmark interest rate at which major banks historically lent to one another.