Liquidation Cascades: How They Unfold

A liquidation cascade starts when forced closes push price into the next band of leveraged positions, which are then force-closed too, pushing price further. Each step is a real order, which is why a cascade shows up in recorded data as bright, adjacent cells on the liquidation heatmap.

Recorded liquidation data can show a cascade after it has happened; it does not forecast one. We tested whether this data forecasts direction and published the results; none found a durable edge. An earlier version of this page carried a worked example with figures that were not drawn from recorded data, and it has been withdrawn. See the live liquidation heatmap.