In finance, liquidation refers to the process of selling off assets in order to raise cash to pay off debts or other obligations. This can occur when a company goes bankrupt or when an individual is unable to meet their financial obligations. In trading, liquidation can refer to the process of closing out a position by selling off the assets held in that position. This can occur for a variety of reasons, such as to limit losses or to take profits. When many traders are liquidating their positions at the same time, it can create increased volatility in the market.