How to calculate liquidation price
Long Liq Price = Entry × (1 − 1/Leverage + MMR) Short Liq Price = Entry × (1 + 1/Leverage − MMR)
MMR is the maintenance-margin rate. Mark the output as an estimate — exchanges differ in how they treat fees and tiered maintenance margin.
Worked example. A 10× long on BTC entered at $60,000, with a 0.5% maintenance margin.
1 / 10 = 0.10 Liq Price = 60,000 × (1 − 0.10 + 0.005) = 60,000 × 0.905 = $54,300
Liquidation sits at roughly $54,300 — about 9.5% below entry. A short at the same entry and leverage would liquidate near $65,700, about 9.5% above.
- •Take the inverse of your leverage — that is roughly how far, in percent, price can move against you before liquidation.
- •For a long, subtract that fraction (less the maintenance margin) from 1 and multiply by entry. For a short, add it.
- •The result is the price at which the position is force-closed.
Why it matters for your trading
Liquidation price is the number that turns leverage from a tool into a trap. At 10× a 10% adverse move wipes you out; at 25× it takes barely 4%; at 50× a 2% wick — routine in crypto — is enough. Knowing the level in advance lets you place your stop-loss well before it, so you exit on your terms instead of being force-closed at the worst possible price with a liquidation fee on top.
The practical rule that falls out of this: your stop should always sit between your entry and your liquidation price, never beyond it. Size the trade with the position size calculator, confirm the stop clears the liquidation level here, and you have removed the single most common way leveraged accounts blow up.