Understanding Liquidation Price in USDT Contracts

What is Liquidation in Crypto Trading?

Liquidation occurs when the Mark Price reaches your position's liquidation threshold, forcing automatic closure at the Bankruptcy Price (0% margin level). This happens when your Position Margin can no longer cover the required Maintenance Margin.

Key Concepts:

• Mark Price: The fair value price used for liquidation calculations
• Bankruptcy Price: Where your margin balance reaches zero
• Maintenance Margin: Minimum required margin to keep positions open

Example Scenario:
If your BTC position has a liquidation price of 15,000 USDT while trading at 20,000 USDT, a drop to 15,000 USDT triggers liquidation as losses exhaust your maintenance margin.

How Liquidation Price is Calculated

(A) Isolated Margin Mode Calculations

In isolated margin, your risk is limited to the allocated position margin. The liquidation formulas differ for long and short positions.

Long Position Formula:

Liquidation Price = Entry Price - [(Initial Margin - Maintenance Margin)/Position Size] - (Extra Margin Added/Position Size)

Short Position Formula:

Liquidation Price = Entry Price + [(Initial Margin - Maintenance Margin)/Position Size] + (Extra Margin Added/Position Size)

Practical Examples:

1. Basic Long Position

   • BTC Entry: 20,000 USDT
   • Leverage: 50x
   • Position Size: 1 BTC
   • Initial Margin: 400 USDT
   • Maintenance Margin: 100 USDT
   • Liquidation Price = 19,700 USDT

2. Short Position with Added Margin

   • Added 3,000 USDT margin
   • New Liquidation Price = 23,300 USDT

3. Funding Fee Impact

   • 200 USDT fee deduction
   • Adjusted Liquidation Price = 19,900 USDT

👉 Master margin trading strategies to avoid premature liquidations.

(B) Cross Margin Mode Dynamics

Cross margin shares your available balance across positions, making liquidation prices more dynamic.

Core Formulas:

For Profitable Positions:

Long: [Entry Price - (Available Balance + IM - MM)]/Net Position Size  
Short: [Entry Price + (Available Balance + IM - MM)]/Net Position Size

For Losing Positions:

Long: [Mark Price - (Available Balance + IM - MM)]/Net Position Size  
Short: [Mark Price + (Available Balance + IM - MM)]/Net Position Size

Illustrative Cases:

1. Perfect Hedge

   • Matching long/short positions never liquidate
   • Example: 1 BTC long + 1 BTC short

2. Partial Hedge

   • Net exposure determines liquidation risk
   • Example: 2 BTC long + 1 BTC short = 1 BTC net risk

3. Multi-Asset Portfolio

   • Shared USDT margin affects all positions
   • Losing positions reduce available balance for others

Risk Management Strategies

1. Monitor positions regularly, especially during volatility
2. Maintain buffer margin above maintenance requirements
3. Use stop-loss orders as secondary protection
4. Consider position sizing relative to account balance

👉 Advanced liquidation avoidance techniques can help preserve your capital.

FAQ Section

Q: How often is liquidation price recalculated?
A: Continuously, based on real-time mark price and margin changes.

Q: Can funding fees trigger liquidation?
A: Yes, when deducted from position margin due to insufficient balance.

Q: What's safer - isolated or cross margin?
A: Isolated limits risk to single positions; cross offers flexibility but compound risk.

Q: How does leverage affect liquidation price?
A: Higher leverage brings liquidation closer to entry price.

Q: Can I recover funds after liquidation?
A: No, liquidated positions are closed at bankruptcy price.

Q: Why did my cross margin LP change suddenly?
A: Other positions' losses may have reduced shared available balance.