What Is a Liquidation Price in Crypto Trading?

Your liquidation price is the price at which the exchange closes your leveraged position automatically, because the money you put up has almost run out. It is not a warning or a suggestion. It is a level calculated the moment you open the trade, and if the market touches it, the position is shut and the collateral behind it is gone. Every exchange that offers leverage — and every borrowing protocol such as Aave — shows you this number before you confirm. It is the single most important figure on the screen.

What decides where it sits?

Three things: the price you entered at, how much collateral you posted, and how much you borrowed on top. The more you borrow, the less room there is. A long position at ten times leverage is roughly ten per cent of a move away from liquidation; at twenty times, roughly five. Bitcoin moves five per cent in an afternoon often enough that this stops being theoretical. The exchange also keeps a small maintenance margin, so liquidation actually arrives slightly earlier than the arithmetic suggests, and there is a fee on top when it does.

Why did I get liquidated at a price the chart never reached?

Because most exchanges liquidate against a mark price, not the last trade on their own book. The mark price is an average drawn from several major venues, which protects you from being wiped out by one strange print on a thin market — but it also means the number that matters is not always the candle you are looking at. A brief spike on your exchange may not trigger anything, while a broad move across the market will.

How do you push it further away?

Borrow less. Cutting leverage from twenty times to three does more than any other adjustment. Add collateral to an open position and the liquidation price moves away, though sending fresh money to defend a losing trade is how small losses become large ones. Best of all, place a stop-loss well above your liquidation price so you close the trade on your own terms — the exchange charges nothing for that, and a liquidation costs you a fee on the way out.

Before you confirm any leveraged trade, read the liquidation price and ask yourself whether the market has moved that far in a single day this month. If the answer is yes, the position is too big. Our guides to leverage and margin trading cover the rest of the mechanics.