Liquidation price
Also called: liq price · liquidation level
Definition
The liquidation price is the mark price at which your leveraged position will be forcibly closed because your margin would fall to the maintenance margin level.
How liquidation price works
Exchanges show an estimated liquidation price for every open position. For a long, it sits below your entry; for a short, above it. The distance depends mainly on leverage: higher leverage means less room. Maintenance margin rate, fees and, in cross mode, your other balance and positions also affect it.
A simplified formula for an isolated long is entry × (1 − 1 ÷ leverage + maintenance margin rate). For a short it is entry × (1 + 1 ÷ leverage − maintenance margin rate). Real numbers differ slightly because of fees, funding and tiered maintenance rates, so rely on the figure your exchange shows.
The liquidation price is not fixed. Adding margin moves it further away. Funding payments and partial closes can move it, and in cross mode any change to your balance or other positions changes it. The trigger is the mark price, which is designed to resist brief spikes on a single exchange.
Example
Suppose you open an isolated 10x long on BTC at 60,000 USDT with a maintenance margin rate of 0.5%. Using the simplified formula, the liquidation price is 60,000 × (1 − 0.1 + 0.005) = 54,300 USDT, about 9.5% below entry. At 25x the same formula gives 60,000 × (1 − 0.04 + 0.005) = 57,900, only 3.5% away. A 10x short from 60,000 would be liquidated near 65,700.
Common mistakes
- Assuming the liquidation price never changes after opening the trade.
- Comparing it with the last traded price instead of the mark price.
- Placing a stop-loss so close to the liquidation price that slippage could carry the fill past it.
Learn and practise
FAQ
How do I move my liquidation price further away?
Add margin, reduce the position size, or use lower leverage when opening. In cross mode, a larger free balance also helps.
Why was I liquidated before the chart reached my liquidation price?
Usually because the mark price, not the last price on the chart, touched the level, or because fees and funding shifted the liquidation price.