When you trade futures with leverage, you put up a small deposit, called margin, to control a bigger position. A futures contract gives leveraged exposure; it is not an ordinary cash loan. If price moves against you and your account no longer meets the required maintenance margin, the exchange may force-close the position. That forced close is a liquidation.
Why it matters for price
A liquidated long position is closed by selling. A liquidated short is closed by buying. When many traders use similar leverage and similar stop levels, one move can trigger a chain: the first liquidations push price a bit further, which triggers the next ones. That chain is often called a cascade or a flush.
Because these orders are forced rather than chosen, a cascade can push price further and faster than the news behind it would justify. When the forced orders run out, the pressure can fade just as quickly.
What to take from it
- Leverage shortens the distance between a normal move and losing your margin.
- Liquidations are public on most exchanges, so you can see when a cascade is happening.
- A flush tells you about positioning, not about where price must go next.