What liquidation means
When you trade crypto futures with leverage, you only put up part of the position’s value as margin. If price moves against you far enough that your remaining margin falls below the maintenance margin, the exchange closes the position for you. That forced close is a liquidation.
You lose the margin allocated to that position (all of it on isolated margin), and you usually pay a liquidation fee on top. The exchange does this so that your losses never exceed the money you put up.
How to calculate your liquidation price
Exchanges use detailed formulas that include tiered maintenance rates and fees, but for an isolated position this simplified version is close:
- Long: liquidation price ≈ entry × (1 − 1 ÷ leverage + maintenance margin rate)
- Short: liquidation price ≈ entry × (1 + 1 ÷ leverage − maintenance margin rate)
Example: you go long BTC at $60,000 with 10× leverage, and the maintenance margin rate is 0.5%. Liquidation ≈ 60,000 × (1 − 0.10 + 0.005) = $54,300, a drop of about 9.5%. The same trade as a short liquidates near 60,000 × (1 + 0.10 − 0.005) = $65,700.
The maintenance rate depends on the coin and on position size: small positions on major coins have the lowest rates, while large positions and small-cap coins have higher ones. Funding payments and fees also eat into margin, so the real liquidation price creeps closer over time. Always check the figure your exchange shows before you enter.
Leverage vs distance to liquidation
| Leverage | Approximate move to liquidation |
|---|---|
| 2× | About 50% |
| 5× | About 20% |
| 10× | About 10% |
| 25× | About 4% |
| 50× | About 2% |
| 100× | Under 1% |
The maintenance margin shaves a little off each figure. At 50× and above, normal intraday noise is enough to liquidate a position, which is why high leverage is mostly a way to lose margin quickly. See leverage trading explained.
Why liquidations come in cascades
A liquidation is a market order: a liquidated long is sold and a liquidated short is bought back. When many traders use similar leverage and similar stop levels, the first liquidations push price into the next cluster, which triggers more. This chain reaction is a liquidation cascade.
In the data it shows up as a sharp price move, a volume spike and a large drop in open interest within a few candles. When open interest stops falling, the forced selling or buying is usually done. Read more in open interest vs volume.
How to avoid being liquidated
- Use a stop-loss well before your liquidation price. Being stopped out costs less than being liquidated, because you keep the rest of your margin and skip the liquidation fee.
- Size the position from your stop, not from the leverage slider. Risk a fixed small share of your account per trade.
- Prefer isolated margin while learning, so one bad trade cannot drain your whole account. See cross vs isolated margin.
- Watch crowded positioning. Extreme funding and fast-rising open interest mean a cascade is more likely.
Spotting a flush in progress
Long liquidation flush
A fast drop on heavy volume while open interest collapses: longs being forced out.
Short liquidation squeeze
The mirror image: shorts being bought back.
Free live tools
- Liquidation price calculator: your liquidation price on Binance or Delta in seconds.
- Long/short ratio live: the 60 most liquid Binance perps, with top-trader positioning.
Frequently asked questions
What is liquidation in crypto?
Liquidation is when an exchange force-closes a leveraged futures position because its margin can no longer cover the loss. You lose the margin on that position and usually pay a liquidation fee.
How is liquidation price calculated?
For an isolated long, roughly entry × (1 − 1/leverage + maintenance margin rate); for a short, entry × (1 + 1/leverage − maintenance margin rate). Exchanges add tiered rates and fees, so use their calculator for the exact figure.
Can I lose more than my margin when liquidated?
On most major exchanges, no. Your loss is limited to the margin on that position (or your account balance on cross margin), and an insurance fund covers any shortfall.
What does liquidations today mean?
It is the total value of futures positions force-closed across exchanges in the last 24 hours. Large totals usually follow sharp moves and mark crowded positioning being cleared out.
Crypto futures are leveraged and carry a high risk of loss. This guide is educational and is not investment advice.