What exactly is a liquidation, anyway?

A liquidation is a forceful closure of positions to reduce or entirely stop the losses your account is accumulating, before your account becomes insolvent. This exposure, however, doesn’t just vanish — there are traders on the opposite side who expect the ‘mirror PnL’ of your position. This means the exposure needs to be transferred to someone else, who receives the position at a discount. This entire operation is handled by a special component called the Liquidation Module.