What liquidation really is
• Liquidation is when, just before borrowed money can no longer be repaid, the exchange forcibly closes the position to recover its collateral
• It triggers when the loss falls below the maintenance margin
Isolated and cross
• Isolated confines collateral to 'this position only' and protects the rest of the assets
• Cross uses the whole account as collateral, so the liquidation line is farther away, but once touched the entire amount is at risk
Where people slip
• They confuse liquidation with 'touching the stop-loss line' — liquidation is cut off by the exchange by force, usually on worse terms than a stop
• Even with the right direction, if the collateral to hold on runs out first, it ends before then
Liquidation happens not because the price view was wrong but because the strength to hold on gave out. For beginners, isolated margin confines the loss in advance.
Which are you using, isolated or cross, and do you know how liquidation differs from a stop-loss?