- Liquidation is when the exchange force-closes your position because your margin can no longer cover the loss.
- Rough estimate for isolated margin: long ≈ entry × (1 − 1/leverage + MMR), short ≈ entry × (1 + 1/leverage − MMR).
- Your stop loss must sit well before liquidation. At very high leverage the gap can be small.
What liquidation price means
When you open a leveraged position, your margin absorbs the losses. If price moves far enough against you that the margin left falls below the exchange's maintenance requirement, the exchange closes the position for you. That price is the liquidation price. You lose the margin (on isolated mode), usually plus a liquidation fee.
How to calculate liquidation price
Short: Liquidation ≈ Entry × (1 + 1 ÷ Leverage − MMR)
MMR = maintenance margin rate. It varies by exchange, pair and position size; 0.5% is a common figure for smaller positions on major pairs. These are estimates for isolated, USDT-margined positions and ignore fees and funding. Always check the liquidation price your exchange shows before you confirm.
Worked examples from real trades
Using an MMR of 0.5%:
| Trade | Entry | Stop loss | Est. liquidation | Gap stop → liquidation |
|---|---|---|---|---|
| UNI short 35x | 8.9390 | 9.0922 | ≈ 9.150 | ≈ 0.6% |
| BTC short 39x | 81,316.70 | 82,567.73 | ≈ 82,995 | ≈ 0.5% |
| ETH short 45x | 1,796.67 | 1,820.63 | ≈ 1,827.6 | ≈ 0.4% |
Look at the last column. At 35x to 45x, the stop sits less than 1% of price before liquidation. In normal conditions the stop fills first. In a very fast move, though, slippage can carry the fill past the stop, and a gap that small leaves little room. That is one more reason to take high-leverage signals at lower leverage if you are unsure: the same trade at 10x puts liquidation roughly 9.5% away from entry instead of about 2%.
| Leverage | Distance to liquidation (approx.) |
|---|---|
| 5x | 19.5% |
| 10x | 9.5% |
| 20x | 4.5% |
| 35x | 2.4% |
| 50x | 1.5% |
How to keep liquidation away from your stop
- Lower the leverage. The stop and target prices stay the same; liquidation moves further away.
- Size by risk. With a fixed risk per trade, lower leverage only means more margin posted, not more risk. See position sizing.
- Use isolated margin so one liquidation cannot spread. See isolated vs cross margin.
- Check the exchange's figure before confirming, and make sure your stop is clearly on the safe side of it.
Liquidation price vs stop loss
| Stop loss | Liquidation | |
|---|---|---|
| Who sets it | You (from the signal) | The exchange |
| What you lose | A planned amount | The whole position margin, plus a fee |
| When it should trigger | First | Never, if the stop and sizing are right |
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Frequently asked questions
What is liquidation price in crypto?
The price at which the exchange force-closes a leveraged position because the remaining margin cannot cover further losses.
How do I calculate liquidation price with leverage?
For an isolated long, roughly entry × (1 − 1/leverage + maintenance margin rate); for a short, entry × (1 + 1/leverage − maintenance margin rate).
Why is my exchange's liquidation price different from the formula?
Exchanges use tiered maintenance rates, fees and, on cross margin, your whole balance. The formula is an estimate; the exchange figure is the one that applies.
Can a stop loss prevent liquidation?
Usually yes, if it sits well before the liquidation price. In very fast markets, slippage can still cause problems when the two are close.
What leverage avoids liquidation?
No leverage removes it entirely, but lower leverage pushes it much further away: about 19.5% at 5x versus 1.5% at 50x.
Risk warning: trading crypto, forex and other markets with leverage carries a high risk of loss, and you can lose more than you deposit. This article is education, not financial advice. Past results do not guarantee future results.