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CryptoInteractive

Liquidation Price

The price at which a leveraged position is forcibly closed because margin is exhausted.

Also called: liquidation · liquidated · liq price

In plain language

When losses consume your posted margin, the exchange closes the position automatically. You do not get a choice, and you typically lose the entire margin.

Higher leverage moves the liquidation price closer to your entry. At 50x, roughly a 2% adverse move is enough.

Liquidations cluster at obvious levels and trigger cascades: forced selling pushes price lower, which triggers more liquidations.

The formula

Approximate distance to liquidation

100 ÷ Leverage (percent move against you)

Leverage
Position value ÷ margin posted
Note
Maintenance margin and fees make the real distance slightly smaller

Change the numbers

This is the concept as a working tool. Edit any field and watch what moves — that relationship is the thing worth remembering.

Try it yourself
Position Value
$10,000
Effect On Your Equity
-20%

If price moves 2% against you

Move To Liquidation
10%

Before fees and maintenance margin

Leverage does not change the asset's move — it changes what that move does to you. At 10x, roughly a 10% move against the position wipes out the margin behind it.

Size a leveraged position with a real stop

Seen on a chart

One thousand dollars of capital controlling a ten thousand dollar position at ten times leverage$1,000YOUR CAPITAL10×$10,000POSITION VALUEA 2% MOVE AGAINST THE POSITION−$200= −20% of your capitalThe asset moved 2%. Your equity moved 20%.
Leverage multiplies the size of the position and therefore the effect of every price move on your capital. It does not change the odds.

Why it matters

Your stop loss should always trigger well before liquidation. If the liquidation price is closer than your stop, the exchange is managing your risk instead of you.

Common mistakes

  • Setting a stop beyond the liquidation price, which makes the stop meaningless.
  • Using maximum leverage and leaving no room for normal volatility.
  • Assuming liquidation returns some capital. Usually it does not.

Keep exploring

These concepts are connected. Understanding one usually makes the next one easier.

LeverageRisk Management

Using borrowed capital to control a position larger than your account balance.

Perpetual FuturesCrypto

A leveraged derivative contract that tracks an asset’s price with no expiration date.

MarginRisk Management

The capital your broker requires you to post to open and hold a leveraged position.

Margin CallRisk Management

A broker demand for more capital when account equity falls below the required minimum.

Stop LossOrders

A predefined exit that closes a losing trade before the loss becomes serious.