Futures & Derivatives

Liquidation price explained

Liquidation price

Quick definition: The liquidation price is the price at which the exchange automatically closes your leveraged position.

The liquidation price depends on your entry price, leverage and margin mode. The higher the leverage, the closer the liquidation price is to your entry.

Quick estimate: for a Long, liquidation price ≈ entry × (1 − 1/leverage); for a Short ≈ entry × (1 + 1/leverage). The actual figure on the exchange is slightly closer because of fees and maintenance margin.

Always set your stop loss before the liquidation price. With a proactive stop loss you lose a little; if you get liquidated, you lose almost your entire margin.

💡 Example

Long BTC at $80,000 with 10x leverage: liquidation price is around 80,000 × (1 − 0.1) = $72,000.

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Related terms

LiquidationLiquidation happens when a leveraged position has lost almost all of its margin, and the exchange automaticall…LeverageLeverage means borrowing extra capital from the exchange to open a position larger than the money you have. It…MarginMargin is the money you put up as collateral to open and hold a leveraged position. There are two main modes: …Stop lossA stop loss is an order that automatically closes your position when the price moves against you to a level yo…

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Educational content for reference only, not financial advice. Leveraged trading carries the risk of losing your entire capital.