Leverage trading involves significant risks, and understanding liquidation prices is crucial for risk management. When the maintenance margin ratio falls below 100%, the system triggers forced liquidation by canceling orders according to predefined rules.
Calculating Liquidation Price
Single-Currency Margin Mode Formulas
Long Position
Liquidation Price = (Debt + Interest) × (1 + Position Tier Maintenance Margin Rate) × (1 + Taker Fee) / Position Asset
Short Position
Liquidation Price = Position Asset / [(Debt + Interest) × (1 + Position Tier Maintenance Margin Rate) × (1 + Taker Fee)]
👉 Use this leverage calculator to simplify your calculations.
Cross-Currency Margin Mode
In this mode, all account assets are converted into USDT as collateral. Liquidation is determined by the maintenance margin ratio:
- Warning at ≤300%: System alerts for position reduction.
- Liquidation at ≤100%: Forced liquidation is triggered.
Maintenance Margin Ratio Formula:
Maintenance Margin Ratio = Available Margin / (Maintenance Margin + Liquidation Fee) - Maintenance Margin: Calculated based on (Position Size + Pending Order Quantity).
- Liquidation Fee: Calculated similarly.
How to Avoid Forced Liquidation
1. Add Margin
- Isolated Margin: Top up the specific position.
- Cross Margin: Deposit funds into the trading account.
Increasing margin lowers liquidation risk by adjusting the liquidation price.
2. Reduce Leverage
Lowering leverage increases required margin. If the account has sufficient balance, the adjustment succeeds, reducing risk.
3. Close Positions Early
- Full Market Close: Exit risky positions instantly.
Partial Close:
- Long Positions: Reduces estimated liquidation price.
- Short Positions: Raises estimated liquidation price.
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FAQ
Q: What triggers forced liquidation?
A: When maintenance margin ratio ≤100%, the system cancels orders and closes positions.
Q: Can I recover funds after liquidation?
A: No, liquidation closes positions at market price, potentially incurring losses.
Q: How often should I monitor my margin?
A: Regularly check during high volatility to avoid unexpected liquidations.
Q: Does higher leverage always mean higher risk?
A: Yes, while leverage amplifies profits, it also increases liquidation risk.
Key Takeaways:
- Use liquidation formulas or tools to monitor risk.
- Proactively manage positions via margin, leverage, or early exits.
- Cross-currency mode relies on USDT-based margin ratios for accuracy.
By following these strategies, traders can mitigate liquidation risks effectively.