How Crypto Liquidation Works (and How to Avoid It)
By Arshi Khan, Founder of Just4Marketing · October 14, 2026 · 6 min read
What a liquidation price is, how leverage pulls it closer, why your exchange shows a slightly different number, and four practical ways to keep a leveraged trade from being liquidated.
Leverage lets you control a crypto position worth many times the money you put up. It also comes with a hard line: if the price moves far enough against you, the exchange closes the position and keeps your margin. That line is your liquidation price, and knowing exactly where it sits before you open a trade is the difference between managing risk and gambling.
What liquidation actually is
When you open a leveraged trade, the money you put up is your margin. The exchange lends you the rest. As the price moves against you, your unrealized loss eats into that margin. Exchanges require you to keep a small minimum — the maintenance margin, often around 0.5% of the position for major coins on smaller positions. When your margin minus your loss falls to that minimum, the exchange closes the position.
Take a long on Bitcoin at $60,000 with $1,000 of margin and 10× leverage. That opens a $10,000 position of about 0.1667 BTC. With a 0.5% maintenance margin rate, liquidation comes at about $54,271 — a fall of 9.55%. At that point roughly $955 of your $1,000 is gone, and the small remainder is typically absorbed by liquidation fees.
How leverage moves the line
For isolated margin, the long liquidation price is entry × (1 − 1/leverage) ÷ (1 − maintenance margin rate). A quick rule of thumb: the move that liquidates you is a little under 1 ÷ leverage.
| Leverage (long at $60,000) | Liquidation price | Move that liquidates you |
|---|---|---|
| 2× | $30,151 | −49.75% |
| 5× | $48,241 | −19.60% |
| 10× | $54,271 | −9.55% |
| 20× | $57,286 | −4.52% |
| 50× | $59,095 | −1.51% |
| 100× | $59,698 | −0.50% |
At 50× or 100×, ordinary volatility is enough. Bitcoin regularly moves 1%–2% in an hour, so positions that size can be liquidated by noise rather than by the trade idea being wrong.
Why your exchange shows a different number
- Fees and funding. Trading fees and, on perpetual futures, periodic funding payments slowly change your margin, and so your liquidation price.
- Tiered maintenance margin. Larger positions carry higher maintenance rates, which moves the liquidation price closer.
- Cross vs isolated margin. Cross margin uses your whole account balance as collateral, so the liquidation price is further away — but a bad trade can drain the whole account instead of one position.
- Mark price. Exchanges liquidate on a mark price that blends several markets, not the last traded price, to avoid liquidations from a single odd trade.
Four ways to avoid being liquidated
- Use a stop-loss well before liquidation. With the 10× example above, a stop at $58,500 (2.5% below entry) caps the loss at $250 — a quarter of your margin — instead of nearly all of it.
- Size the position from your risk, not your conviction. Decide how much of your account you can lose, then work out the position size from the distance to your stop.
- Use less leverage. Lower leverage on the same position means more margin and a liquidation price further away.
- Add margin if you must hold. Adding $500 of margin to the $10,000 position above lowers the liquidation price from about $54,271 to about $51,256, giving the trade room to breathe.