Liquidation Price Explained: How to Calculate It and Avoid Getting Liquidated
Liquidation is the forced closure of a leveraged position when your losses use up most of your margin. It happens automatically, often at the worst possible moment, and usually includes an extra fee. Knowing where your liquidation price sits — before you enter — is basic risk management.
Why liquidation exists
When you trade with leverage, the exchange is effectively lending you the rest of the position. To make sure losses never exceed your collateral, it closes your position once your remaining margin falls to the maintenance margin level.
Run your own numbers with the free calculator: Position Size Calculator
Open calculator →The simplified formula (isolated margin)
Long liquidation price ≈ Entry × (1 − 1 ÷ Leverage + Maintenance margin rate)
Short liquidation price ≈ Entry × (1 + 1 ÷ Leverage − Maintenance margin rate)
Real exchanges also account for fees, funding and tiered maintenance rates, so their figure will differ slightly. Always check the liquidation price shown by your exchange.
Worked examples
Entry at $100,000, maintenance margin rate 0.5%:
| Leverage | Long liquidation | Distance | Short liquidation | Distance |
|---|---|---|---|---|
| 2× | $50,500 | −49.5% | $149,500 | +49.5% |
| 5× | $80,500 | −19.5% | $119,500 | +19.5% |
| 10× | $90,500 | −9.5% | $109,500 | +9.5% |
| 20× | $95,500 | −4.5% | $104,500 | +4.5% |
| 50× | $98,500 | −1.5% | $101,500 | +1.5% |
At 50× leverage, a 1.5% move against you closes the trade. Bitcoin regularly moves that much within a day.
Maintenance margin tiers
Exchanges use higher maintenance margin rates for larger positions. A small position might need 0.4–0.5%; a very large one might need several percent. Higher maintenance margin moves the liquidation price closer to your entry.
Isolated vs cross margin
- Isolated margin: only the margin assigned to that position is at risk. The formula above applies.
- Cross margin: your entire available balance supports the position, pushing the liquidation price further away — but a losing trade can consume your whole account.
Read isolated vs cross margin.
The golden rule: stop before liquidation
Your stop-loss must be between your entry and your liquidation price. If liquidation comes first, your stop never triggers, and you lose your entire margin plus a liquidation fee.
Example: long at $100,000 with 20× leverage. Liquidation is about $95,500. A stop at $94,000 is useless — you would be liquidated $1,500 earlier.
How to reduce liquidation risk
- Lower your leverage. It is the most direct way to move liquidation further away.
- Size by risk so that a stopped-out trade costs a small percentage of your account.
- Avoid adding to losing positions, which moves the average entry and liquidation price.
- Watch funding payments, which reduce margin over time on positions held for days.
- Be careful around major news, when wicks are common.
Calculate before you trade
The position size calculator estimates your liquidation price and warns you if it would be reached before your stop-loss, so you can adjust leverage before entering.
CryptoMathly provides educational estimates only and is not financial, investment or tax advice. Crypto assets are volatile and you can lose money. Always verify figures with a qualified professional.