How Did My Loss Become Someone Else’s Perfect Entry?
The first time I got liquidated, I thought it was bad luck. The second time, I blamed myself. But after watching price spike right after I got wiped out—again and again—I started asking deeper questions. That’s when I learned about cascading liquidations.
In leveraged futures markets, every position comes with a liquidation price. When price hits it, the trader’s position is forcibly closed—usually sold into the market—by the exchange. But here’s the trap: when thousands of traders cluster around similar levels, one liquidation can trigger the next. That sets off a domino effect. Forced sell after forced sell, price falls sharply—not because sentiment changed, but because positions were mechanically flushed.
Exchanges and large players know this. They see the liquidation layers—heatmaps of where the majority of over-leveraged traders sit. A small push toward those levels can create an artificial move downward, triggering mass liquidations, allowing smart money to buy the dip they engineered.
So I didn’t just lose my trade. I became part of someone else’s entry. And in this game, your pain is the liquidity.