How Liquidation Prices Really Work (With the Formula)

When you open a leveraged position you borrow against your margin. If the market moves against you far enough that your remaining equity can no longer cover the maintenance margin, the exchange force-closes the position. The price at which that happens is the liquidation price.

The isolated-margin formula

Ignoring fees for a moment, with leverage L and maintenance margin rate MMR:

• Long: liquidation = entry × (1 − 1/L + MMR)
• Short: liquidation = entry × (1 + 1/L − MMR)

Example: you go long BTC at $100,000 with 10x leverage and 0.5% MMR. Liquidation ≈ 100,000 × (1 − 0.1 + 0.005) = $90,500. A 9.5% drop wipes out the position. At 50x the same trade liquidates after roughly a 1.5% move — within normal daily volatility.

Why the exchange shows a slightly different number

Real platforms add taker fees on close, funding payments, and use tiered MMR tables where the rate rises with position size. Cross-margin mode also pulls in your other balances. Treat any standalone calculator as a conservative estimate, then confirm against the figure in your position panel.

Three rules that keep you alive

• Size positions so a liquidation costs you an amount you planned to risk — never more.
• Set the stop-loss before the entry, not after.
• Above 20x, normal volatility becomes an existential threat. Respect the math.

Run your exact numbers — entry, leverage, margin, MMR — in our leverage calculator before every trade. It takes ten seconds and can save the whole account.