The Core Idea

A position is liquidated when accumulated losses eat through your margin down to the maintenance margin requirement. So the question is always the same: how far can price move against you before your equity hits that floor?

For an isolated long, the rough formula is entry price × (1 − initial margin rate + maintenance margin rate). The initial margin rate is simply 1 divided by your leverage — at 10× that's 0.10, or 10%.

For a short, you flip the sign, because losses come from price rising: entry price × (1 + initial margin rate − maintenance margin rate). The maintenance margin rate is small, commonly 0.4% to 1% on majors, and it nudges the liquidation price slightly closer to entry than leverage alone would suggest.

Worked Example: Isolated Long on BTC

You long BTC at $65,000 with 10× leverage in isolated margin, on 0.1 BTC — $6,500 notional, $650 margin. The initial margin rate is 10%, the maintenance margin rate is 0.5%.

Liquidation price ≈ 65,000 × (1 − 0.10 + 0.005) = 65,000 × 0.905 = $58,825. A drop of roughly 9.5%, well inside a normal week, force-closes the trade.

Cut leverage to 5× and the initial margin rate becomes 20%: liquidation moves to about 65,000 × 0.805 = $52,325, a 19.5% buffer. Leverage is the dial that sets your distance to liquidation.

A short works the same way with the sign flipped. Short ETH at $3,000 with 8× leverage (initial margin rate 12.5%): 3,000 × (1 + 0.125 − 0.005) = $3,360, so ETH only needs to rally about 12% to force-close it.

Cross vs Isolated: Why the Price Moves

In isolated margin, only the margin you assigned to that one position backs it. The liquidation price is fixed by that isolated balance, and if the trade dies, the loss is capped there.

In cross margin, your entire futures wallet backs the position, so the liquidation price is pushed much further away — the whole balance is available to absorb losses. That extra cushion is also the trap: a single bad cross-margin trade can drain funds meant for every other position, and when liquidation finally comes it can be far larger. Cross widens your buffer at the cost of putting your whole balance at risk.

Funding matters too. On perpetuals, every funding payment debited from your margin nudges an isolated liquidation price closer to entry over time. A position that looked safe on day one can sit much nearer its liquidation level a week later, purely from funding bleed.

Common Mistakes

  • •Computing liquidation off leverage alone and forgetting the maintenance margin rate and fees, which sit between you and the textbook number.
  • •Assuming a cross-margin liquidation price is "safe" because it is far away, ignoring that the whole wallet is on the line.
  • •Not recalculating after adding margin or after days of funding payments.
  • •Using a different exchange's tier table — maintenance rates rise as position size grows, moving liquidation closer on big trades.

How This Shows Up in Your Trading Journal

The liquidation price you eyeball at entry and the one you actually get hit at often differ once fees and funding are in.

Tradermake.money records the real entry, leverage, and margin mode for every imported position, then shows net PnL after funding — so the gap between your planned risk and your true risk stops hiding. When a trade does get force-closed, you can see exactly how close your liquidation price had crept before it triggered.