Liquidation Price
The price at which a leveraged position is forcibly closed because margin is exhausted.
Also called: liquidation · liquidated · liq price
Written by Javier Sánchez Ros
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
Worked through
$1,000 of margin at 25x, long bitcoin from $60,000
- Position value
- $25,000
- Distance to liquidation
- 100 ÷ 25 = 4%
- Liquidation price
- ≈ $57,600
- A stop at $57,000 would
- never trigger
The last line is the one worth sitting with. A trader who decided on a $57,000 stop — a considered level, below a swing low — has placed an order that can never fill, because the exchange closes the position at $57,600 first and the stop dies with it.
The stop was not too wide for the chart. It was too wide for the leverage, and the leverage was chosen before anyone looked at where the stop belonged. That is the wrong order, and it hands your exit to a margin engine that has never seen your analysis.
Run it the other way and the number falls out on its own. If the stop belongs at $57,000, that is a 5% move, so the leverage has to be low enough that liquidation sits beyond it — well under 20x, with room left for the fees and maintenance margin that make the real distance a little shorter than 100 ÷ leverage suggests.
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.
- Position Value
- $10,000
- Effect On Your Equity
- -20%
- Move To Liquidation
- 10%
If price moves 2% against you
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 stopSeen on a chart
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.
Using borrowed capital to control a position larger than your account balance.
A leveraged derivative contract that tracks an asset’s price with no expiration date.
The capital your broker requires you to post to open and hold a leveraged position.
A broker demand for more capital when account equity falls below the required minimum.
A predefined exit that closes a losing trade before the loss becomes serious.