Liquidation Explained Simply
Understand liquidation price, margin danger and how traders reduce forced closure risk.
When margin becomes insufficient
Liquidation is the exchange process triggered when an account or position no longer meets the required maintenance margin. The exact calculation depends on contract rules, position size, collateral and account mode. Exchanges may use a mark price rather than the last traded price.
Isolated and cross margin
In isolated mode, a position has allocated collateral, subject to the platform rules. Cross margin shares eligible collateral across positions. A loss elsewhere can change the margin available to a position that has not moved much itself.
What to check
Inspect maintenance tiers, mark price, estimated liquidation level and the effect of open orders. A stop can reduce exposure before liquidation but execution is not guaranteed at the requested price. A universal liquidation formula would be misleading across contract types.
Distinguish a stop from liquidation
Hypothetical worked example. A trader might plan to exit a long entered at 100 with a stop at 97. Liquidation is a different mechanism enforced by the exchange when margin conditions are breached. The stop price alone does not establish where liquidation occurs or ensure the stop will execute first.
Can this scanner tell my liquidation price?
No. It does not know your collateral, margin mode, maintenance tier or other positions. Use the exchange’s position-specific estimate and understand which price triggers each mechanism.
Verify the assumptions
Check the input window, fees and data availability before applying this example. For the exact software behavior and coverage limits, read the scanner methodology. Examples explain arithmetic and interpretation; they are not historical performance claims.