How to Calculate the Liquidation Price of a Position

Knowing the price at which your position will be liquidated is the most important piece of information before you enter. The exchange shows this number, but understanding how it comes about helps you choose leverage and avoid surprises.

The general idea

On isolated margin, the position is liquidated when the unrealized loss consumes the margin, minus a small amount the exchange keeps as a safety buffer, called the maintenance margin. The higher the leverage, the smaller the margin and the closer liquidation gets.

Simplified formula

With leverage L and maintenance margin rate m (for example, 0.5%, which varies by exchange and by value tier):

• Long: liquidation price ≈ entry price × (1 − 1/L + m)
• Short: liquidation price ≈ entry price × (1 + 1/L − m)

Numerical example

Entry at $100, 10x leverage, 0.5% maintenance:

• Long: 100 × (1 − 0.10 + 0.005) = $90.50 (a 9.5% drop).
• Short: 100 × (1 + 0.10 − 0.005) = $109.50 (a 9.5% rise).

With 5x: the long is liquidated near $80.50 and the short near $119.50. With 2x, near $50.50 and $149.50. The lower the leverage, the farther away liquidation is.

In arbitrage, look at both legs

In funding rate arbitrage, you hold a long on one exchange and a short on another. If the price rises a lot, the short gets close to liquidation while the long is in profit, but that profit is on another exchange and does not help the short’s margin. That is why the distance to liquidation of each leg has to be monitored separately.

Multi Arbitrage reads each leg’s liquidation price from the exchange and exits in slices starting at 80% of the way to it. See how to avoid liquidation. To understand the prices involved better, read mark price and index price.

The effect of fees and funding

Funding paid reduces the available margin and brings liquidation closer; funding received does the opposite. On long-held positions, the difference builds up. That is why the liquidation price shown by the exchange can move over time, and the bot re-reads it periodically to keep the exit zone up to date.

Percentage distance to liquidation

A simple way to keep track: calculate the percentage distance between the current price and the liquidation price. At 10x, it starts near 9.5%. If the price travels 80% of that path (about 7.6%), the bot starts exiting. When the distance falls below what you can tolerate, reduce the position or add margin.

Frequently asked questions

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Multi Arbitrage TeamInformational content about crypto arbitrage and futures. Not investment advice.