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Liquidation and margin

Margin is your own money backing a leveraged position. If losses nearly eat it up, the exchange force-closes the position: that is liquidation.

Skenuok.lt teamPublished 3 min read

With 10x leverage, a 10% drop wipes out the margin: liquidation.
Example: With 50x leverage a move of just 2 % against you can liquidate the position, even if price comes back later.

What margin is

Margin is the money that backs a leveraged position. Initial margin is needed to open it: for example, a 1,000 USDT position at 10x needs 100 USDT. Maintenance margin is the minimum that must remain for the position to stay open. The exchange sets its size.

How liquidation happens

When losses push the margin below the maintenance level, the exchange force-closes the position. In futures this is usually based on the mark price rather than the last trade, so the exact level can differ from the spot chart.

Roughly: a 10x long would lose its entire margin after a 10% drop, and it is liquidated even earlier because of maintenance margin and fees. The rule of thumb: divide 100% by the leverage. In isolated mode liquidation takes only the margin assigned to that position; in cross mode the whole account balance is collateral.

TipThe exchange shows the liquidation price in the position window as soon as the position is open. It is worth checking before setting the stop.

Real example: BTC on 10 October 2025

On 10 October 2025 BTC/USDT fell from 114,267 to 102,000 within one hour (21:00-22:00 UTC), about 11%, and closed the hour at 113,452. From the day's high of 122,550 to the low, the drop was about 17%. Price came back within the same hour, but for a 10x long opened at 114,267 a move of that size would be enough for liquidation. The recovery would not help such a position: a liquidated position is closed.

BTC/USDT hourly chart for 9-12 October 2025: a sharp drop to 102,000 within one hour and a return above 113,000. The level where a 10x long from 114,267 would lose its whole margin is marked.
BTC/USDT, 1h, 2025-10-09 12:00 to 2025-10-12 12:00 UTC, Binance spot data. The 102,840 level is a teaching calculation (10% below 114,267), not a real trade. Futures liquidation uses the mark price, which can differ from spot.

Common mistakes

  • Placing the stop beyond the liquidation price. The stop then never triggers, because liquidation comes first.
  • Topping up margin on a falling position so it does not "get kicked out". That puts even more money into the loss.
  • Using cross mode without realising the whole account is at risk.
  • Believing price has to come back. Even if it does, it changes nothing for a liquidated position.

How to practise

Before each practice leveraged trade, work out which move against you would wipe out the margin (100% divided by the leverage) and compare it with the distance to the stop. If the stop is further away, the trade is planned wrong. Also write down the margin mode: isolated or cross. More in Leverage and futures.

RiskThis content is for education only and is not financial or investment advice. Crypto trading carries a high risk of loss. We do not promise profits.

Frequently asked questions

Can you lose more than your margin?
In isolated mode you usually lose only the margin assigned to the position. In cross mode the whole account balance covers the loss. Each exchange sets its own rules, so they are worth reading before trading.
How do you estimate the liquidation price?
A first estimate: divide 100% by the leverage. At 10x that is a 10% move from the entry, at 20x 5%. Real liquidation happens a little closer to the entry, and the exact figure is shown in the exchange's position window.
Why do liquidations make sudden drops worse?
When many longs are liquidated, they are closed with market sells. Those sells push price lower and reach the liquidation levels of other positions. The result is a chain reaction known as a liquidation cascade.

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Related terms

LeverageLeverage is borrowed funds that let you open a bigger position than your own money allows. It magnifies profit and loss equally.Isolated and cross marginIn isolated mode you only risk the margin assigned to that position. In cross mode the whole account balance is the collateral, so you can lose more.Perpetual futuresA perpetual future is a futures contract with no end date, used to open longs or shorts with leverage. Its price is kept near spot by the funding...Stop lossA stop loss is a preset order that closes the position if price moves against you to a certain level. It caps your maximum loss on a single trade.Funding rateA periodic payment between longs and shorts in perpetual futures. When it is positive, longs pay shorts; when it is negative, the reverse.Position: long and shortA position is an open trade: a long profits when price rises, a short when price falls. Shorts are usually opened with futures.