Liquidation Price

Liquidation price is the calculated price level of the underlying asset at which the collateral supporting a trading position becomes insufficient and the exchange may begin forced closure.

The liquidation price depends on position direction, position size, margin, leverage, maintenance margin, fees, and the exchange’s risk rules.

Long and short positions

For a long position, liquidation risk increases when the price falls significantly. For a short position, the critical movement is a significant price increase.

In simplified terms, the smaller the trader’s own collateral relative to position size, the smaller the adverse market movement required to reach liquidation.

Why calculations differ

Exchanges use different formulas and parameters. Calculations can include maintenance margin, closing fees, position size, cross or isolated margin, and other variables.

Liquidation price should therefore be treated as a position-specific metric rather than a universal market value.