What is liquidation in crypto futures? How the price is calculated
Liquidation is the exchange closing your leveraged position because your margin no longer covers the loss plus a safety buffer. You lose the margin in that position, and sometimes a fee on top. It is not a stop you chose. It is a limit set by leverage.
Margin and the maintenance buffer
When you open a leveraged position, you post margin, which is the position value divided by the leverage. The exchange also requires a minimum margin to keep the position open, the maintenance margin, a small percentage of the position value that varies by contract and by position size. When your margin minus the loss falls to that level, the position is liquidated.
Estimating the liquidation price
For isolated margin, a simple estimate is:
Long: entry × (1 − 1 / leverage + maintenance margin)
Short: entry × (1 + 1 / leverage − maintenance margin)
With a 60,000 entry and 0.5% maintenance margin:
| Leverage | Long liquidation | Move against you |
|---|
| 5x | 48,300 | 19.5% |
| 10x | 54,300 | 9.5% |
| 20x | 57,300 | 4.5% |
| 50x | 59,100 | 1.5% |
The real figure differs with fees, funding already paid and tiered maintenance margin on larger positions. Your exchange shows the one that counts.
Mark price, not last price
Most exchanges liquidate on the mark price, a smoothed price built from several markets, to limit the effect of a single wick. You can see a candle on your chart touch the liquidation level without being liquidated, and the reverse can also happen. Check which price your exchange uses.
Isolated and cross margin
With isolated margin, only the margin assigned to that position is at risk. With cross margin, the whole account balance backs the position, so liquidation sits farther away but a bad trade can take the account. Pick one deliberately and know which one a position uses.
Keeping the stop ahead of liquidation
- Size from the stop first, then choose leverage so liquidation is far beyond the stop. A common guideline is a liquidation distance of at least two to three times the stop distance.
- Do not move the stop beyond the liquidation price. It would never trigger.
- Decide in advance whether you will ever add margin to a losing position. Doing it moves liquidation away and raises the amount at risk. Making that choice under pressure is usually a mistake.
- Remember that very fast moves can fill beyond a stop and trigger liquidation on thin markets.
Liquidation heatmaps
Heatmaps show estimated clusters of liquidations built from public data and assumptions about leverage. They are estimates, not a record of real positions, and they are not a signal on their own.
The lessons on leverage and risk explain these ideas on video: see the channel.
This guide is education, not advice. Your numbers, your exchange and your rules decide what is right for you.
Questions people ask
What happens when I get liquidated?
The exchange closes your leveraged position because margin no longer covers the loss plus a safety buffer. You lose the margin in that position, and sometimes a fee on top.
What is the difference between isolated and cross margin?
With isolated margin only the margin assigned to the position is at risk. With cross margin the whole account balance backs it, so liquidation sits farther away but a bad trade can take the account.
How far should liquidation be from my stop?
A common guideline is a liquidation distance of at least two to three times the stop distance. It is a guideline, not a rule.