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What is a liquidation price?
A liquidation price is the market price at which a leveraged position's remaining collateral falls to the platform's minimum, so the platform closes the position automatically. For a long position it sits below the entry price; for a short, above it. The more leverage, the closer it sits.
What it means for you
Reaching the liquidation price usually means losing most or all of the margin on that position, and the close happens at whatever price the market gives. Fees, interest and funding payments can move the level closer over time. Platforms calculate it differently, so the number the platform shows matters more than your own estimate.
How it works
Margin is collateral, not partial payment. A position has an initial margin to open it and a maintenance margin that must stay on deposit; when equity falls to the maintenance level because of adverse price moves, a margin call or a forced close follows. Leverage shrinks the distance: the larger the position relative to the margin, the smaller the price move that uses the margin up. A study of bitcoin perpetual futures found forced liquidations were substantial every day and that liquidated traders had used about 60 times leverage on average.
An example
Say you open a $1,000 long with $100 of margin, 10 times leverage, and the platform's maintenance margin is $5. A drop of about 9.5 percent leaves only $5 of equity, so the position is closed near that price and roughly $95 of your $100 is gone, before fees.
Sources: CFTC Glossary, Cheng, Deng, Wang and Yu: Liquidation, Leverage and Optimal Margin in Bitcoin Futures Markets (arXiv), SEC Investor Bulletin: Understanding Margin Accounts · checked 4 October 2026
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Educational content, not financial advice. Written by hand and checked against the source named above. Something wrong? Tell us and we reply within two business days.