Liquidation is the protocol's safety mechanism. If a position's debt grows too large relative to its collateral, part of the collateral is sold so that both the position and the protocol stay solvent. Here is what that means in practice.
When can a liquidation happen?
Two conditions are monitored continuously:
Interest must stay covered. Accrued interest needs to be paid down over time so it does not eat into the position's health.
The position must stay above its liquidation threshold. If the position's asset falls far enough that your liability approaches the maximum allowed, the position becomes unhealthy.
Each position shows its own Liquidation Trigger price in the Summary section and on the price chart, so you can always see how much room you have. The thresholds behind it are protocol parameters set by governance, so read them from your position rather than from a fixed number.
To avoid overreacting to momentary price dips, the trigger uses a smoothed (moving-average) price rather than a single tick.
What actually happens
Liquidations on Nolus are partial by design. The protocol sells only as much collateral as it needs to bring the position back to a healthy state, so the position stays open at a reduced size. Only if the entire amount is required does a full liquidation occur, and in that case the position is closed. The sale runs through an integrated exchange aggregator.
Nolus also runs a Market Anomaly Guard (MAG). Before executing a liquidation sale, the protocol checks the price it would actually get. If the expected proceeds fall below a fair-value threshold, for example during a flash crash or a market liquidity anomaly, the liquidation is held instead of executed and your position shows Market Anomaly: Watch Mode Active until conditions allow it to proceed.
A held liquidation is paused until the Nolus team resumes it. Your position stays open and there is nothing you need to do. A liquidation also moves between Nolus and Solana over the protocol's transfer channel, so it can take a while to complete.
How to avoid liquidation
Watch your position's health in the app, especially in volatile markets. Turning on the alert bell in Settings adds push notifications as health deteriorates.
Repay part of the loan to lower your liability. See Repay or Close a Margin Position.
Use protective orders such as Stop Loss, so you exit on your own terms before the liquidation threshold is reached.
Size positions conservatively. A lower leverage multiple leaves more room for the market to move against you, and the maximum is up to 5x.
Where to read more
For the broader risk picture, see Understanding the Risks Involved. The full technical specification of the liquidation engine and risk framework lives at docs.nolus.io.