Liquidation Price
The liquidation price is the price level at which a leveraged position's margin falls to the maintenance requirement, so the platform automatically closes or reduces it. The higher your leverage, the closer the liquidation price sits to your entry price.
What determines it
Three things mainly set your liquidation price: your entry price, your leverage (how much margin backs the position) and the platform's maintenance margin rate. Fees and accumulated funding payments also shift it slightly. For a long position the liquidation price is below entry; for a short, it is above.
Most crypto platforms compare your position against the mark price, a fair-value reference, not the last traded price, so the liquidation price is a mark-price level. It is often better described as a price area, because fees, funding and tiered margin rules can move the exact level.
A worked example
Say you go long 1 BTC at 50,000 dollars with 10x leverage, posting 5,000 dollars of margin, and the maintenance margin is 0.5 percent. Simplified, you are liquidated when losses reach about 5,000 minus 250 dollars, which is 4,750. That happens near 45,250 dollars, a fall of about 9.5 percent. At 20x, with 2,500 dollars of margin, liquidation would come after a fall of only about 4.5 percent. A short at 10x from 50,000 would be liquidated after a rise of about 9.5 percent.
Actual levels differ by platform formula, fees and whether you use isolated or cross margin.
Moving it further away
You can push the liquidation price away by using less leverage, adding margin to the position, or reducing its size. With cross margin, your free account balance supports the position, so the liquidation price moves as your balance and other positions change.
A stop-loss placed well before the liquidation price lets you exit on your own terms, usually at a smaller loss and without the liquidation fee.
Why it is often hit unexpectedly
Crypto prices regularly move 5 to 10 percent within hours, so high-leverage positions can be liquidated by ordinary volatility. When many positions share nearby liquidation prices, forced closures can push the price further and trigger more liquidations, a liquidation cascade. In thin markets, the actual close may happen at a worse price than displayed.
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Frequently asked questions
Can my liquidation price change after I open a trade?
Yes. Funding, fees, added or removed margin, and changes in a cross-margin account can all move it.
Why was I liquidated when the chart never reached my price?
Liquidation usually uses the mark price, not the last price on the chart, and the two can differ during volatile moments.
What happens to my margin when I am liquidated?
Most or all of it is lost. Platforms typically charge a liquidation fee, and any remainder may go to an insurance fund.
Related terms
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