Liquidation
Glossary · Derivatives
Liquidation is the forced closure of a leveraged position when its margin can no longer cover losses; the exchange closes it at the maintenance-margin threshold. Your liquidation price depends on leverage, margin mode, and position size — at 10x with isolated margin, a move slightly under 10% against you ends the trade.
"It's the exchange closing your trade for you because your margin ran out — the market didn't stop you, your leverage did."
Every leveraged position has a maintenance margin — the minimum collateral the exchange requires, usually around 0.4–1% of notional on BTC and higher on alts. When mark price moves so your equity falls to that line, the liquidation engine takes over and market-closes you, keeping whatever margin remains as a liquidation fee that feeds the insurance fund. At 10x isolated the trigger sits a bit under 10% away; at 50x it's under 2% — inside a normal hour's noise on most alts. And it fires on mark price, not the last traded print.
The cost isn't just the loss — liquidation exits you at the worst price, exactly where the move exhausts. If your liq price and your stop-loss sit close together, you don't have a stop, you have a donation. Decide where the idea is wrong first, place the stop there, then pick leverage so liquidation sits far behind it. And remember clustered liq levels are visible to bigger players — parking yours at the obvious round number below support is how you become the liquidity.
Related jargon
Questions
- What is Liquidation in crypto trading?
- Liquidation is the forced closure of a leveraged position when its margin can no longer cover losses; the exchange closes it at the maintenance-margin threshold. Your liquidation price depends on leverage, margin mode, and position size — at 10x with isolated margin, a move slightly under 10% against you ends the trade.
- How would a trader say it?
- It's the exchange closing your trade for you because your margin ran out — the market didn't stop you, your leverage did.
Part of the Crypto Jargon glossary — every term, decoded the way a trader would say it.
Crypto Jargon
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