A liquidation break in a market refers to a rapid and sharp price decline caused by the forced selling or liquidation of positions, often on a large scale.
This can happen for various reasons, such as margin calls, fund redemptions, or risk management protocols that trigger automatic selling.
During a liquidation break, traders and investors scramble to exit their positions to minimize losses, leading to increased selling pressure and further price declines. Liquidation breaks are often temporary phenomenon that can ultimately stabilize a market.
« Back to Glossary Index