What is Liquidation Price?
The price at which your leveraged position is forcibly closed by the exchange to prevent negative balance.
When you trade with leverage, you borrow funds from the exchange. If the market moves against you and your margin falls below the maintenance margin threshold, the exchange automatically closes (liquidates) your position before you can lose more than your deposited collateral.
How it's calculated:
For a long position:
Liquidation Price ≈ Entry Price × (1 − 1/Leverage + Maintenance Margin Rate)
For a short position:
Liquidation Price ≈ Entry Price × (1 + 1/Leverage − Maintenance Margin Rate)
Example: You open a BTC long at $50,000 with 10× leverage and 0.5% maintenance margin.
$50,000 × (1 − 0.1 + 0.005) = **$45,250**
If BTC drops to $45,250, you get liquidated.
How to avoid liquidation: