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Liquidation Price: How to Calculate It and Avoid Getting Liquidated

Understand how liquidation price works for long and short positions, why leverage matters and how to keep a safe buffer.

The simple version

For an isolated long, liquidation happens roughly when price falls by (1 ÷ leverage) minus a small maintenance margin. At 10x that is about 9-10% below entry; at 50x it is about 1.5-2%. For a short the same distance applies upward.

An example

You open a 10x long on BTC at 65,000. Margin is 10% of the position. A fall of about 9.5% to near 58,800 would trigger liquidation once fees and maintenance margin are included. Exact numbers vary by exchange.

Isolated versus cross margin

Isolated margin limits the loss to the margin on that position. Cross margin shares your whole account balance as collateral, which pushes liquidation further away but can put everything at risk.

Staying safe

Choose a stop loss from the chart, then pick the leverage that puts liquidation far beyond it. Most professionals use low effective leverage. Use our free liquidation calculator before you place a trade and always confirm on the exchange, which has the final number.

Common mistakes

Opening a position at the maximum leverage, setting the stop beyond the liquidation price (so the exchange closes you first), and adding margin to a losing trade instead of cutting it.

Use the rule: the stop must come at least one third of the way before liquidation. If it cannot, reduce leverage or size until it can.

Partial liquidation and insurance funds

Some exchanges close only part of a position first, giving you a chance to add margin. Others close the whole position at once. Many keep an insurance fund to cover losses when the market gaps past a liquidated position. Read how your exchange handles it, since it changes how much buffer you really have.

Key takeaways

  • Liquidation distance is about 1 ÷ leverage.
  • Isolated margin caps the loss.
  • Stop loss must come before liquidation.
  • Verify numbers on the exchange.

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Educational content, not financial advice.