Mudrex allows users to test their strategies using leverage on Bitmex. Leveraged trading always requires the user to first submit a 'Margin' amount as collateral to cover for their losses. More details about it can be found here.
Exchanges with support leverage trading at all point in time keep checking the profit/loss that a user is making on their open position. This is important to the exchange because if the user has a loss on the trade and it ends up being higher than the margin amount the user has kept then the difference will need to be paid by the exchange.
To avoid paying this additional charge, exchanges typically close the trade before the loss ends up being higher than the margin. This action of closing the trade is called 'Liquidation' and the trade is supposed to be 'Liquidated'
You can read more about how Bitmex handles liquidation here.
In order to accurately simulate performance while leverage trading Mudrex offers a similar feature to users while backtesting and paper trading. When a backtest/paper trade run is liquidated, it implies that the amount with which you had started was not enough to cover your losses and the exchange would have closed your trade.
Note: Most exchanges use a separate price feed for liquidation called the Index Price feed. Mudrex uses the asset price feed and hence liquidation is an approximation because the Index price feed and the asset price feed always differ by ~1%.
Always make sure that your strategy has enough risk protection that you are not liquidated!